While wise investors know that diversity is key to a strong portfolio, many want to build passive income through real estate investment, which allows them the luxury of maintaining their lifestyle. Buyers looking to enter the real estate game in Detroit may feel overwhelmed at the thought of juggling all of the responsibilities of being a landlord. We’ll explain alternative methods to gain entry into real estate investing through notes, REITs and wholesaling.
When you enter the stock market, you understand that you are buying stock, which represents a percentage of the company. The main difference between the two is that real estate is a secured investment through the nature of the collateral being real property. Note investing in real estate in its simplest form is a method of owning the promise of payment on a mortgage over a specified period of time. When a home buyer goes to the lender and secures a mortgage, there is no guarantee the lender will not put the note onto the secondary mortgage market for trading in this manner. Notes can be purchased as a whole, or for the entire lifetime of the loan. They can also be purchased in sections, and are available in different lengths or time. The transfer could be for periods such as 36 months and then will revert back to the original holder for the remainder of the note. Note buying is a great option for those looking to get started with real estate investment, but who don’t want to deal with tenants or repairs.
A real estate investment trust (REIT) is a corporation with holdings of a variety of commercial properties, which they may also operate, as well as mortgage notes. They lease their commercial space and earn residual income through their rentals. They may also act as a financer for commercial properties as well. There are many laws that regulate REITs including tax laws, so proceed with proper guidance. You’ll want to be certain you understand the variations in this method well. In addition to having a trusted professional on your team, you’ll want to do your homework. There are many types of REITs and within those many operating systems which differ widely. Many of these REITs are publicly traded, meaning you are able to enter this method of investing in real estate through a broker or your financial advisor in Detroit.
Before you enter into the wholesaling method of investing in real estate, you’ll want to make certain that you’re aware of the laws that govern wholesale real estate transactions in Detroit. This is a great entry into the market for new investors or those without a large amount to invest. Your target in this business is to find properties that are exhibiting signs of abandonment or lacking in upkeep and maintenance for a variety of reasons. This type of transaction involves three parties, and it’s worth noting from the beginning honest is the best policy for the most successful outcome. The first party will be you, as the wholesale buyer, who will gain financially by locating another buyer, the second party. You’ll be moving the property from the seller to you, to your buyer, all at the same closing. This is why it is extremely important to be upfront with the seller about your wholesaling plans, with the seller allowing the property to transfer temporarily to you and then to the final buyer. The last thing you want is the seller to learn you’re making an instant profit on the sale of their home and have them leave the closing table and your deal behind.
Freedom Acquisition Management LLC is here to help you with any questions you may have about other types of real estate investment. Send us a message today! We are happy to answer all of your questions!