Understanding REITs – How Real Estate Mutual Funds Work

Posted on July 5, 2011 by IC N in Finance
re_investing

 

First, it is wise to understand what real estate mutual funds are. Real estate mutual funds are essentially portfolios where shares of a variety of stocks and bonds are purchased and put in one package that you can then purchase shares of. In the case of real estate mutual funds you are purchasing shares of stocks and bonds that are specifically in the real estate arena.

There are two types of mutual funds – open and closed-end mutual funds. Open-end mutual funds are those that can grow and have unlimited numbers of shares. The way it works is, as new shareholders want to buy in, the fund will purchase more and more shares of the assets inside of it. On the other hand, closed end funds have a set number of shares when they go up for an IPO. Once those shares are purchased someone has to sell shares in order for someone else to be able to buy into the fund.

A similar item to purchase is real estate investment trusts, also known as REITs. These generally are shares in particular real estate interests. This could mean that you are purchasing shares into a series of apartment complexes, condos or commercial properties. Your shares in this case are used to purchase property, maintain it and then profit from it. The profits that come from the REITs are mostly given back to the shareholders in the form of dividends. At least 90 percent of the profit must be returned to shareholders.

If you are pretty sure you want to purchase real estate mutual funds, you may be wondering where you should purchase them and when? No one wants to buy into something just to have it drop.

When it comes to the where of purchasing, consider a brokerage firm that is only focused on real estate mutual funds and REITS. REITBuyer.com is one such company. They are the only site that just does REITs and real estate mutual funds. As an online brokerage that specializes in REITs and real estate mutual funds, you know they will have the type of focus and attention to detail on the investments you are planning to sink your money into. The more the brokerage knows about these things, the more you can learn about them, meaning you can make much wiser investments.

As for the when of buying into real estate mutual funds, this is the perfect time to buy. Right now the markets are at a record low. That means they will soon start moving back up again. Those who have the money to invest right now stand to be able to make great profits when the market rises again.