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How To Invest In Real Estate for the Income Oriented Investor

One thing that I like about investing in the stock market are dividends. Of course in order to get those dividends you have to worry through the massively nauseating swings up and down that the stock market is famous for that can wipe out your portfolio before you know it. I like the income that dividends produce, but I don’t like the risk involved in earning it.

If you’re like me then you may be looking for alternative investment opportunities that are not dependent on the stock market but are still geared towards someone looking for income. Fortunately real estate investing may be just the thing for you.

Luckily, these days, real estate investing doesn’t necessarily mean owning a bunch of small rental units and worrying about fixing broken toilets on the weekends. In fact there are many forms of real estate investing that are better suited to producing income and I’m going to talk about them in this article today.

One form of real estate investing is something that is called a participating mortgage loan. These funds hand their investors capital to other real estate investors, which is quite interesting. In return those investors pay a fixed rate of interest plus a share of any future increase in their cash flow from the properties that they own as well as any appreciation in the underlying property.

This is possible because of the type of mortgage that you create which spells out that the investor will pay a basic interest rate as well as increases in future cash flow of the underlying property.

While the interest that you will earn on these deals is a nice bit of income, what you should be especially interested in is the possibility for future increases in cash flow from the appreciation of the underlying properties themselves. That’s where some of the real money comes into play and that’s what makes these types of investments especially attractive and exciting.

What happens is that properties are leased out. Over time those leases expire and when they do new tenants are usually found who sign new leases. The trick is, over time those leases will call for more and more rent as I’m sure you have seen yourself if you’ve ever rented anything in your life. Whenever your lease expires and you have to re-sign your rent always goes up. It is this increase in rent that can transfer over to you the mortgage owner in these particular deals.

Of course it’s not all a bed of roses, you still have to be careful with who you select to loan money to. Never invest in a participating mortgage loan given to somebody who doesn’t have a solid track record of property management under their belts.

But just like any other investment you have to do your homework and if you do your homework correctly then these investment vehicles can be a fantastic way to take advantage of income producing steady real estate gains without the hassle of managing the property yourself; because who really wants to get woken up at 3:30 in the morning because your tenet’s toilet exploded?! Not me and now, not you!

By Jason Markum

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