Real Estate: Finding the Wealth in the Land

The most common discussion related to wealth relation often point to the most common possibilities: stock bonds, cash equivalents and mutual funds. However, real estate or properties are removed from the potential wealth-creating picture. Why is it like this?

Since the eighties, real estate and development had experienced a gradual slump. The slump is due to the rising cost of materials and labor. In many industrial countries, a limited labor market is what often inflates the price of development.

An investment in retirement

Unlike other investments like cars, real estate is not a wealth-destroyer. The value of land and other attached structures (houses, garages, etc) do not devaluate over time. Because of the intrinsically limited character of land, all real estate should be viewed as a fixed-value investment.

In retirement, a home would be your biggest investment; it would also be the one that would continually be of greatest utility. Some people prefer to invest in a house in the beginning and sell the property in retirement. By then, the value would’ve increased, and they live off the profit very comfortably.

Investment trusts

REIT or real estate investment trusts have become quite popular in the last decade alone. REIT are simply companies that pool resources to invest in different types of real estate. The stock exchange is used- and REIT companies are required to distribute no less than 95% of all taxable income from all types of transactions and sales to its shareholders.

Different tax rules make REIT attractive as an income-producing venture. There are three main kinds of REITs. Equity REIT companies focus on purchasing income-producing properties. Income producing companies include apartments, condominiums, commercial spaces, etc.

Mortgage REITs on the other hand purchase construction loans and similar loans. Mortgage REITs, because of the nature of their transactions with the market, are more sensitive to market fluctuations than other REITs. The third type of REIT is the hybrid REIT. Hybrid REITs are focus on both income-producing properties and mortgages.

Mutual funds

Mutual funds on the other hand are the youngest applications of investment on real estate properties. Mutual funds invest in different REIT companies, timber industries, development industries, construction industries, etc. Those that invest in mutual funds are generally income-oriented.

Some mutual funds on the other hand, focus on investing funds abroad. Investing funds abroad, especially in high-population cities of large countries can become a lucrative venture if mutual funds know how to maximize their investments. And because the free market is generally accessible to those who have the capital funds, you can invest in it too.