The benefits of real estate investment are very clear. It has constantly outperformed the stock market and is considered a great way to build one’s wealth. However, for most people, the hassle of dealing with real estate investment on an individual level as a property owner is quite arduous.
There’s more concern beyond the day-to-day hassles of dealing with tenants and maintenance. For instance, if the investment is conducted incorrectly, it could lead to a negative state of returns. Additionally, even though most people understand the upside of creating a real estate portfolio, they lack information, due diligence capability and rental ownership savvy.
Here is where Real Estate Investment Trusts (REITS) and social investment networks help. Both alleviate the painstaking mission of conducting the entire process of real estate investment for the non-proficient and busy individual investor. In both cases, the real estate investment is managed for you, enabling you to continue with your forte while they deliver on their part and you reap the rewards.
What is a REIT and how do they operate?
REITS, which have been operating in the US for over half a century, are companies that finance or own income-producing real estate. REITS are complex investment tools that, often enough, trade on stock markets and are not owned by single individuals. Such trusts are required to make a distribution of at least 90% of their profits to company shareholders. Individuals invest in REITS through mutual funds, which limit the scope of risk.
Corporations can qualify for low taxation and tax breaks when utilizing the REIT model, which provides a multitude of revenue streams for future capital gains and asset appreciation. There are three main types of REITs. These include equity REITS investing in and owning property; mortgage REITS investing in and owning mortgages of properties; and hybrid REITS, which are a fusion of the former REITS, owning both property and property mortgages.
REITS are a great way to make money over an extended period of time. However, they inevitably incur a higher amount of expenses for the investor in comparison to other real estate equity vehicles, with a lower level of returns. In general, portfolios are harder to manage and bureaucracy is difficult to navigate. REITS also usually specialize in a specific asset class and therefore lack the element of diversification. Investors’ money is pooled and split across an array of assets or mortgages within the REITS portfolio.
Social Investment Networks – The Growing Trend – What is it all about?
Social investment networks are a significant part of the global crowdfunding craze that has evolved with the expansion of technology and the internet. Amendments to investment regulation in the JOBS Act have also provided a flow of new investors who were not previously able to take part in any serious real estate investing. Such individuals can now become a part of a social investment network like iintoo for as little as $25,000, which can be invested in a wide range of asset classes and localities. For each individual investment, the investor will become a shareholder in a project and will be on the receiving end of any income that the real estate venture acquires.
Iintoo, the premier social investment network, is an established REIMCO (Real Estate Investment Management Company), which conducts the entire business planning and underwriting process. This process includes from evaluation of the property through to providing quarterly reports and income distribution. The social investment network operated by iintoo allows for investors to allocate their investments with the possibility of benefiting from the wisdom of the masses, or in this case, accredited investors on the platform. Such a platform empowers the individual investor to maximize their investment opportunity with greater knowledge and the highest level of asset class and geographic diversification in real estate investment.
As an investor in a social investment network, you have full control of and direct exposure to the projects in which your money is channeled, unlike in the case of REITS. In addition, investors will have a larger choice of diversified classes from which to choose. As social investment networks are liquid direct property investments, they are less volatile to stock market changes. This is due to a range of macroeconomic sentiments that can affect the market.
In addition, for tech-driven millennials, there are upsides to interact with likeminded investors and carry out transactions via an online platform that hands the aggregated information to the investor on a silver spoon. Ease of use and transparency on every single deal you make is a part of this generation’s mindset. There is also greater potential to acquire significantly higher yields on social investment networks. Plus, investments are exit-orientated and not locked in for the long term.