Tag Archives: Investment

Mar
27
2023

Investing in Real Estate – 4 Investment Options

Real estate investing is satisfying and lucrative, when done right. It can help you diversify your investment portfolio as well as generate extra income. Many of the real estate investments don’t require you to deal directly with tenants. Also, you can purchase a property by paying only a fraction of the total price and then clearing the balance and interest over time. Here are four real estate investing options.

Rental Properties

Investing in residential rental properties can be great, especially for individuals with renovation and DIY skills, and have the fortitude to deal with tenants.

Pros

• Provides regular income
• Properties can appreciate
• You can optimize capital through leverage
• Many of the expenses are tax-deductable

Cons

• Managing tenants can be tedious
• Vacancies can reduce income
• Tenants can damage property

House Flipping

You can purchase underpriced properties that need a bit of an upgrade, renovate them inexpensively and then resell them at a profit. House flipping, however, comes with some risks. First, your estimate of repair costs must be precise, which is not a simple thing to do. Second, the longer the property is in your hands the less money you’re likely to make because you’ll be paying a mortgage without it generating income.

Pros

• Ties your capital only in the short term
• Potential quick returns

Cons

• A hot market may cool unexpectedly
• Requires deep industry knowledge

Real Estate Investment Trusts (REITs)

REITs are traded in major exchanges, similar to stocks. A REIT comes into being when a trust/corporation uses investors’ money to buy and manage income-generating properties. To maintain the REIT status, 90 percent of the taxable income of the trust/corporation must be paid out as dividends. REITs can enable you to invest in nonresidential properties, like office blocks and malls that, may not be capable of purchasing directly.

Pros

• Highly liquid because they can be traded
• They are in essence dividend-paying stocks
• The holdings are typically cash-producing long-term leases

Cons

• Doesn’t offer the leverage that’s usually available in traditional rental property investing

Online Platforms

These online platforms link investors with developers who need capital for their real estate projects, either through equity or debt.

Pros

• You have the option of investing in a single project or a diverse range of projects
• Geographic diversification

Cons

• Typically illiquid and speculative
• Management fees

Conclusion

The four real estate investment options available to investors include rental properties, house flipping, REITS, and online platforms. Ultimately, the ideal real estate investment opportunities are those that align with your investment goals.

mtfense
Dec
04
2022

Reducing Portfolio Risk With Timber Investments

Investing in Timber is something that has become increasingly popular in recent years and this is largely because it is seen as a way to protect your portfolio in hard economic times. Retail investors as well as institutional investors have started using timber investment as a way to add a great deal of stability to their portfolios. Timber is becoming a great alternative to bonds and stocks which are seen as more volatile financial products in times where the economy is in turmoil.

One reason why the price of timber is so stable, making it such a secure investment, is because prices are negotiated for timber ahead of time. Supply contracts mean that manufacturers are able to hedge potential movements in prices in the market, making investing in timber a safer option for those looking for a low risk investment.

Cash flow in timber is rather interesting because it can often be a while before the investment matures. Once you have major investment it is likely you’re going to have to wait several years before the investment becomes profitable. The rate at which the investment matures largely depends on the sort of wood that you’re investing in as different trees grow at different speeds.

Interestingly, it can sometimes be financially sensible for the company to harvest the trees before the intended period. This is because trees are used for many different purposes, and not all of them require the trees to be fully mature. It will often depend on supply and demand in the market whether the trees are harvested early or not.

This can best be explained through an example: If timber is being grown and it is intended to be harvested for construction purposes when it is mature, this can change if the demand for wood pulp increases. If the demand has increased for wood pulp, then its price is going to increase as well, and it can be effective for companies to harvest the trees before they are mature, pulp them, and return the money to the investors.

Alternatively, if the price of pulp is very low, then trees that were intended for pulping, might be grown to maturity and sold at a later stage in order to return a higher amount to investors, although they are going to have to wait for a while.

There are several simple reasons why timber is going to be a good investment, and why it is going to become an even better investment in the future. One is the simple fact that the demand for timber is consistently increasing. Despite increased levels of recycling, the amount of wood pulp required continues to grow every year.

Investing in an industry which has constantly increasing demand is a sensible financial decision. Timber is also a good investment because it consistently beats the stock-market for returns and as we have already mentioned, is a safer investment.