For an individual, a property may be a property serving as a primary or secondary residence. But when it comes to real estate investment, it is often thought that it is confined to the acquisition of real estate. However, other means of investment in this sector exist.
Real estate investing brings many benefits. First, the stable return provided by real estate helps to amortize the cost of the investment often made through a loan. Today investing in real estate is relatively accessible and profitable given the low interest rates if you finance it via a bank loan.
Second, real estate leases are generally spread over long periods of time, including at least 10 years. That’s what makes real estate investing attractive. It is part of a set of assets that provides its investors with a steady cash flow, even when the stock market collapses.
Unlike housing rentals, direct real estate investments for individuals are virtually impossible because of the high capital required for this type of investment. Buying a property already requires a lot of capital, not to mention a varied real estate portfolio. However, it is possible for an individual to invest indirectly in real estate in different ways.
Special funds invest in real estate
In real estate, it is possible to invest through special funds. For example, mutual funds are companies that are not systematically taxable. Income will become taxable only when the investor realizes profits. In this way, an investor in a real estate fund avoids double taxation.
There are many types of special funds that invest in real estate on behalf of individuals. Real estate subject to investment has a variety of uses and uses. Specialization in one type of property is fundamental, as rental of residential buildings also requires a great deal of expertise to meet the needs of tenants.
Compared with traditional funds, real estate funds have particular characteristics. For example, repatriation of profits can become an additional burden. This surcharge does not concern the fund manager but the fund itself to cover the additional costs of repatriation.
Many real estate investment funds invest in real estate abroad. REITs are subject to their own legislation. For some US funds, for example, they must pay at least 90% of their income in the form of dividends to shareholders. In addition, a REIT-based company is exempt from corporate income tax under certain conditions. Thus, REITs are subject to a single taxation, which is of course an advantage for the investor. The company does not pay corporation tax, but the investor pays the income tax from the dividends received.
Shares of companies investing in real estate
The stock market also offers you other opportunities to invest in real estate. By investing through the purchase of shares, the investor’s profits are no longer dependent on special funds.
On the other hand, the shares of companies investing in real estate also evolve with other stock markets. For example, a real estate investment in the form of shares does not give the equity investor the same diversification benefits as, for example, special funds investing in real estate.