How to Invest in Real Estate

Real estate investing generally falls into a handful of broad paths, each with different levels of control, liquidity, and involvement. Direct ownership, such as buying a rental house, a small apartment building, or a commercial property, gives an investor full control over management and financing decisions but also full responsibility for tenants, maintenance, and property level risk. Real estate investment trusts, or REITs, offer a publicly traded or non-traded way to own a diversified portfolio of real estate through shares, with high liquidity for publicly traded REITs but no direct ownership of any specific property.

Between those two ends of the spectrum sit several structures that provide more passive exposure while still involving ownership of specific real estate. A Delaware Statutory Trust, or DST, allows an investor to own a fractional beneficial interest in a professionally managed property or portfolio, and a Tenancy in Common, or TIC, structure allows co-ownership of a direct fractional deed interest. Both structures can be used as replacement property in a 1031 exchange when structured to meet Internal Revenue Service requirements, which makes them relevant to investors who already own appreciated real estate and want to move into a more passive position without triggering capital gains tax.

Real estate syndications and crowdfunding platforms typically pool investor capital into a limited liability company or limited partnership that then acquires and manages the property, with investors holding an equity or partnership interest rather than a direct interest in the real property itself. Because these interests are generally treated as securities rather than direct real property interests, they typically do not qualify as replacement property for a 1031 exchange, which is an important distinction for an investor comparing passive options.

For an Albuquerque, NM investor deciding how to get into real estate, or how to reposition an existing property, the right path depends on how much direct control is wanted, how much time and effort can be devoted to management, and whether an existing appreciated property needs to move through a 1031 exchange to avoid an immediate tax bill. DST and TIC interests may be securities. We do not sell securities. We provide introductions to licensed providers only. We help Albuquerque, NM investors understand which structures are available and how they fit together with exchange planning.