Investment in Real Estate: Arguments in Favor

Subject: Financial Management
Pages: 2
Words: 646
Reading time:
3 min

There are two basic reasons why an investment company would go for real estate. To begin with, it is imperative to note that renting and buying of real estate is quite lucrative and capable of generating impressive revenue. Eldred (7) notes that it is possible to accumulate significant income and wealth through amortization. On the same note, there is desire for personal challenge. It is again at this backdrop that real estate is regarded as a challenging business that requires lots of patience and perseverance before gaining benefits from it (Eldred 16).

As opposed to buying and selling of equities, bonds and stocks which come with substantial risks, the relative risks involved in real estate are comparatively low. The owner of the property has absolute control of the investment and which is essentially important in avoiding risks. There are minimal chances of losing control due to petty influence and some changes in the market. At times, motions by the majority and loud speculations help manipulate prices and trends of security investment and stock. This is not applicable in real estate investment largely due to the fact that only real influences can have adverse effects on this type of investment portfolio.

In terms of investing one quarter of a billion in real estate, it is worthy to note that investment in real estate has to be well calculated to give back real value of the money invested. With 250 million in the pocket for investment, it is possible to strategically invest in real estate and expect good returns it. The following is a guide of how to put ¼ billion in real estate investment:

REITs: this is a short form for Real Estate Investment Trust and it is a security that goes the same way as stock in exchanges. Mostly, it is done through mortgages and properties, and it gets what can be termed as unique tax considerations. It is touted as an area that can bring high yields to any investor and quite a liquid method in real estate investment. According to Block (152), the best way for an investor putting his or her money in REIT is by understanding the level of REIT’s growth internally and its prospective nature of external achievement. It is hereby proposed that with good knowledge of this investment plan, a company can put substantial amount in it. From the 250 million for investment, putting 150 million in this would work well. The idea is to buy existing properties and mortgages and the revenues would be obtained from renting and leasing of property.

Trading of real estate: the investment company can get good money from buying properties, hold them and then sell the properties when the prices are good. It is proposed that an investment company can secure 50 million of the facility available to buy properties and hold them for one year before selling them. As such, properties that are strategically placed; for example, in areas that are growing fast would be the one to be bought in this case. The latter investment condition is attributed to the fact that the capability of appreciating value of the properties is high. It is also possible to buy properties that are not well developed and then improve them as part of value addition.

Building and buying of rental propertie: even though this is an old practice, it remains relevant in the present world. An investment company can build or even buy houses and then advertise for tenancy or long term lease. The company would act as the agent as well as the landlord of the properties. Besides, it would be responsible for taxes, maintenance costs of the houses and paying for the mortgage. An amount of 100 million can be put for this whole purpose, and ideally, it can be projected that after a 5 year term, it would yield positive returns.

Works Cited

Block, Ralph. Investing in REITs: Real Estate Investment Trusts (4th ed.). New Jersey: John Wiley & Sons, Inc, 2011.

Eldred, Gary. Investing in Real Estate (6th ed.). New Jersey: John Wiley & Sons Inc., 2009.