3 Popular Real Estate Topics Explained.

Posted by discuss | U. S. Real Estate | Tuesday 22 May 2007 3:00 am

Real Estate Investment Trusts – REIT’s
Real Estate Investment Trusts offer a way for smaller investors to buy into big real estate.

If you dream of emulating Donald Trump but don’t have millions to invest in real estate, a Real Estate Investment Trust or REIT can provide some of the upside income potential with a much smaller investment.

Simply put, a REIT is a way for everyday investors to invest in property and real estate. It can be commercial real estate, apartments, condominiums, homes and other types of property. REITs specifically invest in properties that produce income and pass on the profit to investors in the for of dividends. In fact, REIT’s must distribute at least 90% of any profit to qualify for preferential tax treatment.

1031 Exchange
An Even Exchange. Although complex, 1031 exchanges can be a key way to defer taxes on certain property. Established for real estate barons and tycoons, 1031 exchanges have been around since the 1920s. Named for the IRS code which refers to them, the tax-saving tool also known as “flipping” or a “like-kind” exchange has been gaining traction as a way for Americans to save money on taxes from property, by deferring them to another, newly-purchased property.

1031 exchanges are a simple concept surrounded by not-so-simple details. If you own a piece of property, and you wish to sell it and buy another piece of property of equal or greater value, you can defer your capital gains taxes by performing a “like-kind” exchange.

Reverse Mortgages
Switching gears with reverse mortgages offers a unique way to move forward into your retirement with extra income. As many Americans plan for retirement and turn to alternative sources of post work income, one that may come to mind is a reverse mortgage. The concept of a reverse mortgage is rather simple: someone pays you, based on the value of your home. There are many options available as to how you wish to receive this money. You may choose to take monthly payments, take a lump sum, or receive a line of credit.

When you purchased your home you probably had to make mortgage payments. As you did, you gradually decreased the amount of debt owed and gradually increased the amount of equity in your home. Reverse mortgages are the opposite. As time goes by, you gradually receive more and more money from the lending company. Thus, your debt increases and your equity decreases.