Investing in real estate is not just about finding a place to call home; it’s more of an idea of owning a home as a money investment for the sole objective of gaining profit. Real estate investment has become increasingly popular over the decades and is a common investment vehicle now-a-days. And Australia, one of the most multicultural nations in the world with returns over 8 percent in many metropolitan markets, is an excellent investment destination which attracts huge international interest. Over the decades, investing in real estate has proved a considerably secure investment, with Australia managing one of the most consistent property markets in the world.
A Real Estate Investment Trust or REIT is a company or corporation that purchases, manages, develops and sells the real estate assets. It is a tax designation which allows investors to acquire real estate in a tax efficient manner. REIT uses the pooled capital of investors to buy and manage income property and sometimes, mortgage loans. It is a way for investors to invest in property and real estate. It can be commercial real estate, homes, condominiums, apartments, offices and industrial places.
REITs specifically invest in real estate or properties that can produce profit and pass on the profit to investors. They are required to distribute at least 90% of their taxable profit or income annually, to qualify for preferential tax treatment into the hands of investors or shareholders. They are also required to invest at least 75% of their total assets in real estate as well as generate similar amount of contribution from mortgages or investments on real estate.
If one is about to step in the world of real estate investing, then one needs to be aware of the various financing options available. It is very important to search for all viable options for financing, as per the requirements of the individual. Following are the sources of finance for real estate.
Banks- Banks are the most preferred and obvious choice for the finance. Retail banks use their own money to make loans, hence there are very less chances for qualifying to it. Banks use their own rates and guidelines; hence the rates can sometimes be higher. The financing success rate depends upon the relationship of the borrower with the bank. Banks require less documentation formalities and hence are more flexible.
Bridge loans- This is an emergency measure which helps in prevention of foreclosure of the property. These loans require far less time for getting approval and can be repaid later. Bridge loans are for lesser time and have higher rates as compared to banks.
Many times one may have heard the question- Is real estate good or bad? Real estate has always been a good investment plan. This is because if one buys a property and rent it; this can serve as a life long income. Hence, one can earn without much hustle and bustle. On the other hand, real estate has shown its evil face in the recent times of economic slowdown. So, what is real estate all about?
Real estate is all about gamble, its advantages and disadvantages. If it pays off one can get rich instantly by selling off property at high rates than its cost price. If the real estate prices go down then the gamble may ruin you. Many people have made lots of money through real estate investment. The gamble involves purchase of property in a good area with potential development prospects. If the neighborhoods are well developed, then there is every possibility of the property price to shoot up after sometime. However one has to wait for sometime for this profit.
The first question that arises in the minds of people looking for a home is the arrangement of finance for the purchase. This may prompt one to either go to their local bank or to a mortgage broker. If opting for a broker then select one who has been referred by someone. Then comes the question of qualifying for the finance. The following analysis about yourself should do that.
The first thing a mortgage lender will ask is your credit score. There is no need for giving every lender your social security number. One has to just inform them your credit score and the lender in turn will give you the loan rates. For people having credit score lower than 580, it is an uphill task to find finance. However some lenders would provide loan to these bad credit customers at higher price. At the same time it is relatively easier for people having a credit score over 700. A person’s income and debt load also determine the price of the real estate loan.