Real Estate and Investment Strategies: REITs, Property Types, and Inflation Hedges

What is direct real estate investing?

The owner holds legal title to the property purchased.

What is indirect real estate investing?

An investment where a trustee holds legal title to the property on behalf of investors.

What defines commercial property?

Land and buildings that produce rental income.

What happens when renting a second home for more than 14 days?

It is considered a commercial property.

What is a general concept for starting in commercial property?

Start small to build equity.

What is the liability of a limited partner?

Liable only for the amount invested.

What is the liability of a general partner?

Takes complete responsibility for all partnership liabilities.

What are the benefits of a real estate syndicate?

Diversified investments and professional management.

What does REIT stand for?

Real Estate Investment Trust.

How is a REIT similar to a mutual fund?

Both pool funds from multiple investors to invest in real estate.

What are the three types of REITs?

Equity REITs, Mortgage REITs, and Hybrid REITs.

What are federal regulations for REITs?

1. Distribute 90% of net earnings to shareholders. 2. Avoid risky short-term investments. 3. Hire real estate professionals for management. 4. Have at least 100 shareholders.

What are advantages of real estate investments?

1. Hedge against inflation. 2. Easy entry. 3. Limited financial liability. 4. Financial leverage.

What are disadvantages of real estate investments?

1. Illiquidity. 2. Declining property values. 3. Lack of diversification. 4. Lack of tax shelter. 5. Management problems.

How do precious metals, gems, and collectibles act as a hedge against inflation?

They carry value regardless of economic conditions.

What often causes the price of gold to rise?

Economic uncertainty, higher inflation, and lower interest rates.

In what forms can gold be purchased?

Bars, bullion, wafers, and coins.

What are storage issues with gold and silver?

Large amounts are hard to store securely.

What was the impact of 1970's inflation on diamonds and gold?

Resulted in a 40-fold increase in the value of diamonds.

What are problems with investing in gems?

1. Need secure storage. 2. Not easy to convert to cash. 3. Difficulty determining quality. 4. Political unrest can affect supply and pricing.