The CEO of Rastegar Equity Partners, Ari Rastegar, stopped by #BoldBiz to discuss the evolving world of commercial real estate.
Posted by BoldTV on Tuesday, June 6, 2017
Investing in real estate can seem pretty intimidating, especially if you aren’t too familiar with investments in the first place. But Ari Rastegar, CEO of Rastegar Equity Partners, suggests that millennials should invest in real estate first to help them build their personal wealth.
Start with mutual funds or public REITs
Mutual funds or REITs are probably the easiest options for millennials to begin investing. Real estate mutual funds are professionally managed investments that invest in a variety of vehicles such as stocks and bonds. They typically invest in REIT stocks, real estate-related stock, or a combination of both.
On the other hand, an REIT is a corporation, trust or association that invests in real estate through properties or mortgages. Unlike real estate mutual funds, REITs are more of a direct investment; they trade on a stock exchange and are bought and sold like stocks. There are also three major types of REITs: equity, mortgage and hybrid. Each type has a focus of investment.
The good thing about real estate mutual funds and REITs is that they have relatively low investment minimums, making them more accessible to those investors with limited capital access. However, just like with any other investment, the return is not guaranteed.
One step up from real estate mutual funds and REITs would be to move on to private REITs.
Private REITs are quite different from public REITs. For starters, private REITs are not listed on the stock exchange. Private REITs also tend to have a higher return, as they do not have as many additional costs that are paid by the public REITs. Private REITs are also not as accessible as public REITs because they can only be bought by select investors through an Offering Memorandum.
Because of all these differences, private REITs may not be the best option for all millennials, but if accessible, they can offer good returns.
The next step to up your real estate investment game would be to actually buy a property on your own.
Purchasing a property
Before taking the leap and deciding to purchase a property, there are many things to keep in mind. First and foremost, it’s crucial to consider the expected cash flow of the property, how it will be managed, and figure out an exit strategy to get out of the investment when necessary. It’s best to sit down with a professional such as a real estate broker or financial advisor to make your decisions.
The fourth and final option for real estate investments may seem daunting to millennials.
Purchasing a home
Making the decision to buy a home is not easy. Rent is not cheap, so it may be hard for millennials to save up to purchase a home. Fortunately, there are programs available that lower the amount of cash needed upfront to buy a home. Purchasing a home also means that your monthly payments will build equity in an investment that can be sold for profit in the future.
Although it can be seem intimidating at first, millennials can definitely tackle real estate investments. They’re a great way to build personal wealth, even with a small bank account. Making the decision to invest is not easy as there is a lot of risk involved. Hopefully, though, millennials can do more research and take advantage of the opportunity.
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