How To Invest In Real Estate With Little Money using REIT And Crowdfunding
What Is a Real Estate Investment Trust?
A Real Estate Investment Trust — typically called a REIT — is a real estate company that models its business somewhat like a mutual fund, by pooling capital raised by investors to purchase real estate (either for ongoing income or for resale).
REITs operate in virtual every sector of the real estate industry, including:
- Single-family homes
- Apartment buildings
- Data centers
- Medical buildings
- Cell towers
Although most REITs are publicly traded and anyone can purchase shares in them as they would in any other stock, some REITs are private and available only to accredited investors.
Although most people think of real estate as an investment only for rich individuals or those with a lot of capital to invest, the reality is that you can invest in real estate with very little money.
For example, many large real estate companies are publicly traded, and you can simply purchase stock in such companies — real estate brokerages, real estate development companies, construction companies, etc.
Additionally, one of the newer forms of real estate investing, which allows individuals to participate in deals without investing much capital, is Real Estate Crowdfunding.
How Does REIT Investing Work?
The simplest and most widely available way to invest in a REIT is to purchase shares in a publicly traded REIT company or in a REIT mutual fund. Any individual with a stock trading account can invest in REITs this way.
But accredited investors — typically high-net-worth individuals who meet certain minimum financial criteria based on income and total assets — can also invest in private REITs. These are not publicly traded and are not registered with the Securities and Exchange Commission, which means they do not have the same regulatory requirements to disclose details about their financial records. This is why investment opportunities in private REITs are typically open only to accredited investors.
How can I invest in REIT in Nigeria?
Someone reading this article may have asked, are there REITs in Nigeria?
Yes! There are, but because they have not been that popular.
You are not mistaken into thinking or even believing that there are no REITs in Nigeria.
There are three major Real Estate Investment Trusts in Nigeria, There are…
- UPDC Real Estate Investment Trust
- Sky Shelter Fund
- Union Homes Real Estate Investment Trust.
UPDC is the largest of the REITs by asset, having an asset value of N33.2 Billion as at June 28th 2019
Followed by Union Homes’ N9.9 billion and then Sky Shelter’s N2.4 Billion.
Let’s talk about Real Estate Crowdfunding
What Is Real Estate Crowdfunding?
Real estate crowdfunding is a platform (sometimes called a peer-to-peer lending service) that connects individuals who want to invest in real estate with real estate businesses and property owners who need to raise capital for their projects.
These real estate businesses in need of capital can structure their investment opportunities as either debt or equity financing. This means that investors researching real estate crowdfunding opportunities can find deals offering them either debt-based investments (repaid with interest in fixed installments or at the end of a predetermined period) or equity investments, where they can participate in the upside profit on the real estate deal.
Is Real Estate Crowdfunding a Safer Investment?
No investment is guaranteed, and there are risks with all investing including Real Estate Crowdfunding. However, the more sophisticated crowdfunding platforms thoroughly review every real estate deal as well as the team behind it before making it available on their sites for investors.
Additionally, the real estate opportunities offered on crowdfunding platforms do offer the general comfort of investing in a physical piece of property, as opposed to a stock or bond or other nonphysical asset.
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Even if you are a high-net-worth individual who would qualify as an accredited investor, if you are new to REITs the safest way to begin investing in these companies is to start with those that are publicly traded.
Why? Because the stock-exchange-traded REITs are subject to the same financial disclosure rules as any other publicly traded company, which means you should be able to find out more about these companies and their investments than you would with if you were researching a private REIT.
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