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Real Estate 101: Real Estate Investing Companies and Investment Trusts

Real Estate 101: Real Estate Investing Companies and Investment Trusts

In the last real estate investing article for beginners, we covered real estate investing for the individual. However, a significant portion of all real estate is owned and controlled by real estate 

investment companies. These are generally companies organized as traditional businesses — such as corporations, LLCs, LLPs, etc. Here we’ll explore the world of real estate investing companies and how they work.

What Are Real Estate Investing Companies? 

Real estate investment companies are essentially groups of investors who raise capital from other investors and deploy this capital to purchase real estate, either for long-term cash flow and appreciation or for short-term turnaround and profit.

These companies invest in real estate in much the same way as individual investors do — although the bigger and more sophisticated companies generally invest in deals that are far larger or more complex than an individual real estate investor could manage. Some of the larger real estate investment companies even purchase land and then develop the real estate — such as apartment buildings, shopping centers — themselves.

What Do Real Estate Investing Groups Do? 

Within the broad category of real estate investment companies are a subset called real estate investment groups. These organizations perform a very specific function — they purchase or build a group of properties, and then sell them to other investors, who can rent them out. Because they are typically highly sophisticated and knowledgeable, these real estate investment groups also help the investors find tenants and act as property managers, in exchange for a percentage of the rent.

What Are Real Estate Investment Trusts (REITs)?

A Real Estate Investment Trust — typically called a REIT — is a real estate company that models its business somewhat like a mutual fund, by pooling capital raised by investors to purchase real estate (either for ongoing income or for resale).

Most REITs specialize in one or more categories of property, such as office buildings, apartment complexes or self-storage properties.

Although most REITs are publicly traded and anyone can purchase shares in them as they would any other stock, some REITs are private and available only to accredited, sophisticated investors.

Hopefully this clarifies the world of real estate investing a little more for you. In the next article, we’ll be talking about how you can do real estate investing on your own with limited funds.

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