Equity real estate is now often referred to as an umbrella term that includes a variety of related financial markets. Private equity real property is a general term used to describe a certain subset of this vast real property investment asset category.
Equity real estate typically refers to one of four quadrants of this huge real property investment asset category, which include government-owned or government-managed real property, public equity, private equity, and venture capital.
The primary focus of this category of real property investments is usually on real property located in or around large metropolitan areas, where there is a high degree of local and national demand for the type of property being purchased.
Some equity real estate investors are interested in making their own investments, while others choose to partner with other investors in order to create a portfolio of real property for sale. However, many equity real property investors are also able to access financing from banks, mortgage companies, and other third party lenders in order to purchase real property.
As equity real estate deals are made by private equity funds they are normally backed by a combination of credit and property financing.
Many equity property investors are motivated by the desire to make a significant return on their initial investment by purchasing real property.
This type of real property investment is not considered a pure buy-and-hold real estate deal, but rather, an investment in which the return is based on the appreciation of a property’s value. If a real property’s value continues to rise the equity investor can sell their investment to another individual or firm for a larger profit.
One popular type of real property investment that utilizes this type of methodology is referred to as a “revolving fund,” where the money in the fund is invested to purchase the properties in the first place and then used to make the down payment on the properties that are then being financed by the investors.
Private equity is a broad category that covers a wide range of real property investments. Some common areas of investment include energy, infrastructure, telecommunications, consumer and commercial real property, entertainment, and travel.
Equity real estate investors are often referred to as “vulture capitalists” because they frequently purchase real property to either renovate or turn into investment real property.
One of the most controversial forms of this type of real property investment is the practice of buying foreclosure properties at below market value and then attempting to resell these properties at a higher price after a period of time.
Private equity funds are commonly involved in real property investing by purchasing real property and working with financial institutions in order to gain equity or leverage.
Equity funds generally receive loans from these financial institutions and use equity in order to purchase real property. Other types of private investment capital used for real property investing are realtors, banks, insurance companies, and venture capitalists.
While there are some real estate investors who have built substantial wealth through the use of equity capital, others who have made this type of real property investment a specialty to find that their financial resources to allow them to live quite comfortably off their investments.
Some equity investors build their portfolio on a piecemeal basis, purchasing property one piece at a time, while others have chosen to invest exclusively in real property.
Equity real estate investors are often able to take advantage of a variety of tax benefits offered by local governments and other third-party creditors.
Another way that equity investors can make use of the real property is to hold on to their real property when it is under contract and use the cash flow on that real property to make monthly payments.
Another common scenario in which real property investors hold on to real property is to hold on to the property for longer than the contractual agreement is set for and then sell the property at a profit after the contract has expired.
When holding on to the property, the investors will make monthly payments and use the money to pay back the bank, or another third party lender.
Holding onto the real property to make monthly payments may not always be an advisable course of action, however, as most investors will eventually sell their real property.
Equity investing is popular among both private and institutional investors because it allows investors to obtain the best possible rates of return on their investments and it is generally tax-deductible.
It is a good idea for investors to conduct comprehensive research on the various real estate market trends in order to be better prepared for the potential turn-around that most real estate markets go through.
Investors who purchase real property with their own money are at a distinct advantage over investors who buy a property with the help of an institution, as institutional money lenders do not necessarily offer a tax-deductible option.
Equity investors should work closely with their accountant or financial advisor to ensure that they have all the correct documentation relating to the purchase of a real property.