Alex Meskouris of Detroit is a licensed real estate agent and the Founder of AM PM Property Group. In the article below, Mr. Meskouris discusses creative ways to invest in real estate without buying property. For more information on AM PM Property Group and why having a solid company representing your real estate investment please see ampmpropertygroup.com.
The real estate market is often seen as a reliable and profitable investment, yet it takes a substantial amount of financing to purchase a property. Alex Meskouris says that the high buy-ins can become a major limiting factor for individuals wanting to invest in real estate. Fortunately, though, there are a handful of ways for first-time investors to capitalize on real estate without directing purchasing a property.
Alex Meskouris of Detroit discusses that investing in funds and trusts, you can profit from real estate investments without purchasing an entire property. Alex Meskouris looks at some of the most lucrative options for young investors and discover how the real estate market expands beyond simple property purchases and sales.
Real Estate Investment Trusts
Alex Meskouris explains that a real estate investment trust, also known as an REIT, is a company that owns, operates, or finances income-producing real estate. By law, REITs must distribute at least 90% of their taxable income to shareholders in the form of dividends. This makes them an attractive investment for individuals seeking regular income from their real estate holdings, explains Alex Meskouris of Detriot.
There are two types of REITs—equity REITs and mortgage REITs. Equity REITs invest in and own properties, while mortgage REITs loan money to real estate owners and operators. Publicly traded REITs offer individuals the ability to invest in large-scale, diversified real estate portfolios. Alex Meskouris says that because they are traded on major exchanges, they provide investors with liquidity, or the ability to buy and sell shares without hassle.
Non-traded REITs are not listed on an exchange and typically have more relaxed requirements for accredited investors. These types of REITs often invest in a single property or a small portfolio of properties, which can make them riskier than their publicly traded counterparts according to Alex Meskouris.
Real Estate Mutual Funds
Real estate mutual funds invest in a variety of real estate-related securities, including REITs, real estate operating companies, and mortgage-backed securities. Alex Meskouris explains that like REITs, real estate mutual funds offer investors diversification and the ability to invest in a variety of real estate-related assets without purchasing an entire property.
Real estate mutual funds are professionally managed and can offer investors the potential for higher returns than investing in a single REIT. However, they also come with higher fees and expenses, which can eat into returns states Alex Meskouris. Additionally, real estate mutual funds are more exposed to risk since they are focused on a single industry. If the housing market dips, the entire fund can suffer.
Compared to general mutual funds, real estate mutual funds tend to produce slightly lower returns, averaging around 11%, but, nonetheless, they are an excellent way to earn passive income from real estate investments.
Investments in Home Construction Companies
Alex Meskouris of Detroit explains that another way to invest in the real estate market without purchasing an entire property is to invest in a home construction company. Home construction companies are responsible for building and selling houses and, as such, their success is directly linked to the state of the housing market.
When the housing market is strong, home construction companies tend to perform well. The opposite is true when the market is weak. Because of this, investing in a home construction company can be a volatile endeavor. However, for investors with a high tolerance for risk, the potential rewards can be great.
Over the long term, Meskouris says the housing market has always trended upwards, so investing in a home construction company can be a sound way to earn passive income from real estate. Some of the most successful investors, such as Warren Buffet, found their triumphs by investing in home development, going to show that it is a sound investment.
For wealthier investors with a sturdy portfolio, hedge fund investments may be a suitable option according to Alex Meskouris. Hedge funds that focus on real estate invest in a variety of real estate-related assets, including REITs, real estate operating companies, mortgage-backed securities, and real estate loans. However, hedge funds are only available to accredited investors and require a minimum investment of $1 million.
Because hedge funds are not required to register with the SEC, they are not subject to the same disclosure and regulatory requirements as mutual funds. This lack of regulation can make hedge funds riskier than other types of investments and are prone to volatility. If investors play their cards correctly, though, hedge funds can be highly profitable in the short term.
Alex Meskouris of Detroit says that when it comes to investing in real estate, most people think of purchasing a property. Yet, it’s possible to capitalize on the real estate market without buying a home or business. By creating a diversified portfolio of REIT and home development investments, or by investing in a real estate mutual fund, anyone can earn an income from the real estate market.