How to Start Investing in Real Estate Private and Public Equity (VIDEO)
Real estate investing is changing fast, the real estate game is not the same as it was 10-20 years ago. Gone are the days when the best investment option would be dropping your life’s savings in banks to earn interest. Now, lots of investment opportunities are open to individuals and companies. You could go the conventional way and place your funds in banks to earn meager, but secure interest. Or, you could take on a little risk to gain better returns.
Investing in Public Equity and Public Equity
Public and private equity investments are on the upswing. Both investment firms offer a certain degree of ownership to investors, which, basically, attracts more people. Public equity instruments are offered by companies that are publicly listed on the stock exchange, while private equity instruments are from companies that are not publicly listed. Pretty straightforward, isn’t it? But before depositing your savings to any company, public or private, you must look into which investment would work best for you. Here are a few points which could help you decide whether to invest in public equity or private equity.
Minimum Requirements for Investing
You probably know how much you have in your savings account and how much you can afford to spare in investments. Public equity instruments can be purchased at a lesser quantity and cost. Private equity investments, on the other hand, can require a higher minimum investment.
The usual minimum investment is $250,000. However; with pooling, a number of individuals or companies could still invest by pooling together the required amount. This offers more diversification of investors who could sustain the financial needs of the company and lead it to its ultimate gain. Some private offerings offer low entry investment levels so be sure to speak to the manager about minimum investment requirements.
Get a Grip on It
With equity investments, investors can be deemed as part owners of the company, depending on the number of shares they carry. For public equity, investors are usually carrying just minority shares and could not exercise control over the company. Private equity investment is a whole different picture. Investors, more often than not, carry a significant amount of shares and could either influence or control the company’s operations. They certainly can hold more influence over decisions.
What Are the Risks Taken?
Every investment carries a certain degree of risk. Publicly listed companies are subject to stricter financial regulations and could not engage in riskier, but more rewarding, business ventures. Private companies, on the other hand, could venture into industries with great growth possibilities. Being able to work outside the public eye, these companies could make important decisions without undue restrictions for the benefit of investors.
The Benefits or Rewards
Needless to say, private equity investments offer greater rewards to investors. Public equity investors receive substantial (at best) or meager (at worst) dividends depending on the performance of the company. Some companies are even required to keep a certain amount of resources before distributing dividends. Private equity investments could give you the kind of returns you are looking for.
It would always be up to you to decide which investment could work best for you and achieve your desired result. If you want to keep your investment simple, then invest your savings through public equity. But if you would like to achieve the maximum rewards, then go for private equity investments. If you find the right private equity firm it could even be less risky than public companies. Does Enron sound familiar?
The problem with private equity is finding the investments since they are not readily available. You might need to look harder or know someone who has put an offering together. Always remember, no great reward will come to your door unless you are willing to take on a little risk. Public or private equity; which is yours?