Real Estate Investing Made Easier

Real estate investing offers a number of advantages: capital growth, depreciation deductions and income from rentals. And while real estate can involve substantial management responsibilities, it does not have to be a “hands on” investment. An individual can participate in a real estate limited partnership, for example, with a developer serving as general partner. As a limited partner you would share in tax deductions and income.

Real Estate Investment Trusts (REITs) offer another way for small investors to enjoy the benefits of owning diversified portfolios of real estate. REITs typically invest in income-producing real estate or mortgages on income real estate (or both). REITs can operate as trusts or associations or as corporations, with shares being traded on stock exchanges or over the counter. Mortgage REITs pay shareholders based on interest paid to the REIT by borrowers. Equity REITs provide dividends to shareholders produced by rents on income real estate owned by the REIT. Shareholders in equity REITs also profit from capital gains upon the sale of property. Evaluating REITs is tricky, and investors should seek professional advice.

Real estate also can be used to fund charitable remainder trusts, especially in the case of office buildings and apartments that will create heavy capital gains upon a sale. The owner can transfer such properties to a unitrust, for example, avoid capital gains taxes when the property is sold and receive lifetime income and substantial income tax charitable deductions.


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