What Real Estate Investment Firms Do & How They Work
Real estate investment firms can help investors get reliable returns with a personal approach. Learn more about Capstone’s Texas investment opportunities.
Real estate investments can be an excellent way to generate returns. This can include both short- and long-term returns, as well as steady sources of income through rent or interest. Some real estate investments are fairly simple, such as owning a single rental property. A person without much — or any — real estate experience can manage these types of investments if they are willing and able to commit the time and resources. Not everyone can do this, though. Real estate investment firms allow people to passively invest in various types of real estate projects. The investors do not have to manage the investments themselves. The real estate investment firm handles that for them. They help investors meet their goals without dedicating hours and hours learning and adjusting their portfolios. In exchange for their services, they may charge investors a fee. Read on to learn more about how real estate investment companies operate and what they can do for you.
What do investment firms do?
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Real estate investment firms may engage in various activities related to real estate investment, including:
Managing investor funds
Identifying investment opportunities and providing investors with investment options
Receiving funds from investors
Disbursing funds to investors, such as profits, rent payments, or interest payments
Purchasing properties for development, rental, or renovation and resale
Managing the development or renovation of one or more properties
Managing the sale of properties to residents or investors
Managing commercial or residential rental properties
Investors are often able to generate passive returns through real estate investment firms. The firms do the legwork to find investment opportunities and do the work of developing, renovating, managing, or selling properties. Once an investor has made their investment, all that is expected of them is often to collect their returns.
How do investment firms make money?
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Real estate investment firms typically charge fees for the services they provide. This might include regular fees taken out of disbursements made to investors, as well as fees charged directly to investors for specific services or functions. Some firms might take a small percentage of an investment’s profits as a fee. Firms should disclose all fees and other charges to investors upfront and in detail.
Who are the clients of an investment firm?
The types of clients a real estate investment firm represents often depend on the type and size of investments they offer. Individuals may be able to invest in certain projects, but federal law limits many investments to accredited investors. This applies to large and/or complex investments. Individuals with high net worths may qualify as accredited investors. Under recent changes to federal regulations, people who meet minimum requirements regarding investment experience may also be considered accredited.
What are the types of investment firms?
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The terms used to describe real estate investment firms are not always precise, although some terms have specific legal meanings. The following are some of the most common types of real estate investment firms:
Real estate investment trust (REIT): Unlike the other types of firms on this list, a REIT is a distinct type of business entity with a specific legal definition. REITs purchase real estate for investment purposes. They are often publicly traded, so investors are equivalent to many types of corporate shareholders. They receive dividends from the REIT’s profits. Because they are publicly traded, REITs are subject to the full range of federal and state securities regulations.
Real estate investment group (REIG): A REIG may be a partnership or corporation that purchases real estate to rent, or to renovate and sell. They may engage in other activities, such as property development or finance. They may allow investors to contribute to specific projects or a pool of projects. REIGs may take advantage of exceptions in securities regulations by limiting investors to those who meet the definition of an accredited investor. This type of company may also be known as a real estate investment company (REIC).
Private real estate lender: Private lenders make loans for real estate projects that are generally not subject to regulations by the government or entities like Fannie Mae and Freddie Mac. This includes hard money loans and other types of private loans. Lenders obtain the funds to make loans from investors, who receive interest payments through the lender. Like REIGs, private lenders often limit investment opportunities to accredited investors.
Fractional lender: A fractional loan program allows qualified individuals to become lenders on real estate projects. A private lender like Capstone manages the loan. Individuals can research approved borrowers and choose where to contribute funds.
Learn more about what an investment firm can do for you
Capstone Capital Partners is perfect for investors who believe in Texas real estate and want steady returns. The rates of return might be lower than investments in the S&P or other securities, but investments with Capstone offer other benefits. You're trading in a few points of return for a more personalized approach and more reliable returns with a focus on Texas real estate. This is why Capstone is so popular with retirees and those nearing retirement. Contact us to learn more about how we can help you earn returns on your money.
