real estate securities

real estate securities

Various methods for people to invest in real estate without having to buy land and/or buildings.Some of the various methods are the following:

• Bonds for a particular project. One of the earliest issuers was the American Real Estate Company, organized in 1888 with $100,000 worth of capital, it issued almost $15 million in bonds and certificates with installment payments to purchasers. It went bankrupt soon after the 1914 market downturn.

• Stock in a corporation that owns a particular building or project. Early development pioneers sold stock in buildings to be constructed, thus largely eliminating the need to borrow construction money.

• In the 1950s, real estate syndication emerged, with limited partnership interests being offered to the public. They were popular for a few years and then interest waned.

• By 1960, Congress authorized creation of real estate investment trusts (REITs) which would produce favorable tax advantages for investors. Most early REITs were mortgage REITs (ownership of mortgages) rather than equity (ownership of property) investments.

• In the 1980s limited partnerships and syndications became popular again as large, nationwide firms entered the picture as underwriters and promoters. Passage of dramatic tax law changes in 1986 took away many of the tax incentives for this vehicle, leading to its near demise.

• In the 1990s, investment in equity-REITs took off, with that becoming the predominant real estate security for investors.

• Today, tenancy in common investments (TICs) are the favored medium.