Mayflam Real Estate Management

What Is Real Estate?

Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made—including water, trees, minerals, buildings, homes, fences, and bridges. Real estate is a form of real property. It differs from personal property, which are things not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.

* Real estate is a class of "real property" that includes land and anything permanently attached to it, whether natural or man-made.
* There are five main categories of real estate: residential, commercial, industrial, raw land, and special use.
* You can invest in real estate directly by purchasing a home, rental property or other property, or indirectly through a real estate investment trust.

Why should you start investing in Real Estate?

According to data from Forbes, more billionaires made their wealth through real estate investments than any other category--by far. The combination of a consistent cash stream, capital appreciation, and tax breaks have helped lay the foundation of great fortunes and stable retirements. But billionaires aren't the only people who know how to invest in real estate. You can do it, too.

Is real estate a good investment?

The short answer is 'yes'. Investing in real estate is absolutely essential for anyone looking to secure their financial future. Real estate should be one of the core pillars of your investment portfolio for two crucial reasons: 1. According to a recent research paper from the San Francisco Federal Reserve, real estate has historically generated rates of return comparable to stocks and equities with much lower volatility. 2. Real estate investment returns are largely not correlated with stocks or bonds. (Hat tip to Ben Carlson over at A Wealth of Common Sense for his work on this topic). These two points may sound a bit academic. What it means for you is high rates of return without the roller coaster ride of investing in stocks. Real estate investments also have a hidden benefit that we don't normally think about: illiquidity. Some investment advisors tell you that investing in illiquid assets is bad because you might need that money quickly. Trying to unwind a real estate investment can take a lot of time and incur large financial penalties and taxes. The hidden benefit of illiquidity is that it prevents us from becoming our own worst enemies. Great investing requires staying invested long-term without being swayed by the ups and downs of the stock or real estate markets. By putting up financial barriers that keep you from making decisions based on fear or greed, real estate investing lets you reap the benefits of the most powerful wealth-building tool ever imagined: compounded annual returns.

What is real estate crowdfunding?

Crowdfunding refers to a group of people who pool their money together in order to achieve a common goal. Some crowdfunding activities are charitable in nature -- for example, if a person is facing medical bills they can't afford, they may attempt to crowdfund the expenses. Crowdfunding can also apply to investment situations, and real estate is one of the latest applications that has gained popularity. Real estate crowdfunding involves a group of investors who each contribute money to a specific real estate deal. For example, if an experienced real estate investor identifies a lucrative opportunity to renovate an apartment building and then sell it at a profit but doesn't have the necessary capital, they might turn the investment into a crowdfunding opportunity and attempt to raise the rest of the necessary funding from investors like you.

How does Crowdfunded Real Estate work?

The general idea behind real estate crowdfunding is that when a developer or experienced real estate professional identifies an investment opportunity, they don't always have the ability (or desire) to completely fund the investment on their own. So, they'll allow individual investors to contribute some of the project's capital in order to raise enough money to execute their plan. There are three key players in any crowdfunded real estate investment opportunity. First, the sponsor is the individual or company that identifies, plans, and oversees the investment itself. The deal's sponsor will facilitate the purchase of the asset, arrange for any contractors or other needed work, arrange financing, and take responsibility for the eventual sale of the property. Deal sponsors generally contribute some of the project's funding themselves and are also entitled to a certain share of any profits they earn for the deal's investors. Second, the crowdfunding platform is where the sponsor finds investors to raise the necessary capital for a project. Think of the platform as the middleman between investors and sponsors. The platform will ensure a deal meets certain standards, advertise deals to potential investors, guarantee that investors meet the requirements for investment, and deal with regulatory issues. The platform will also collect investors' funds on behalf of the sponsor. Finally, the investor (that's where you come in) contributes some of the deal's required capital in exchange for a share of any profits the deal produces. An investor may get some sort of income distributions and/or be entitled to a proportional payout from an eventual profitable sale. Here's a simplified example of how this might work: Let's say that an experienced real estate developer -- the sponsor -- identifies an office building that is outdated and lacking modern amenities -- and is only 50% occupied -- for sale at a price of $5 million. After a thorough analysis, the sponsor determines that they can invest $3 million in renovations and improvements, lease up the vacant space, and triple the property's rental income. Not only that, but once occupancy is stabilized in three or four years, the building will also have a market value of $12 million, at which time the sponsor will sell the property.