Definition Real estate involves the building or purchasing of residential or commercial property with an intention of renting or selling them for profit.
Difference between Landlords, Traders and Second-Class Traders: Traders, sometimes referred to as property flippers, normally purchase residential or commercial property with the aim of retaining them temporarily until four months tops.
They then sell them after this period in order to make profits.
The traders normally deal with significantly undervalued property or those that are available in hot markets.
Such investors do not keep aside some cash for long-term property mortgage and this explains the devastation they undergo when in possession of long-term property.
These flippers only deal with investments that have intrinsic value, in that they are profitable but do not require any alterations.
In summary, they prefer to engage in investments, which are short-term and risk free.
Second-class traders purchase reasonable priced property then renovate them before selling or renting them out to tenants.
The renovations made on the property determine whether the investment becomes long-term or short-term.
This type of investment is quite disadvantageous in that it is time consuming and investors have to complete one property before moving on to the next.
Landlords, on the other hand, engage in long term investments.
They build or purchase new residential or commercial properties with the aim of selling or renting them out for a profit.
They take larger risks than the traders and also manage the payment of taxes, maintenance of the property and advertising for tenants.
Investment Trusts Trusts come about as a means of getting investors to plough in money so they can purchase and run income properties.
The investment trusts are similar to stocks in that people handle them on major exchanges just the same.
Corporations involved have to pay ninety percent of the taxable profits as dividends in order to maintain its investment trust status.
This prevents the trusts from paying corporate tax as opposed to regular companies, which have to pay taxes on all the profits they make.
Besides paying the taxes, they have the right to decide on whether to distribute the profits after tax deductions or not.
If agreed, they may distribute the profits after tax deductions in the form of dividends.
Investment trusts are solid investments suitable for investors of the stock market interested in earning a regular income.
Investors may access non-residential that are liquid, once they invest in investment trusts.