How to Invest in Real Estate Without Buying a House

Ever wanted to invest in a mall? How about a skyscraper in your favorite city? It's simple, and you can it with less than you think.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Adequate funding for the transaction
• Broker

1. Buying real estate does not solely apply to buying a home and signing documents for an hour. It can be done in less than 5 minutes if you know how. Identify the type of real estate you are interested in--say, retail spaces (shopping malls), vacation properties (hotels) or even professional buildings (offices). If you are like most investors, you want to make the most money, right?
2. Do your own research on a financial website, like MSN Money or Google Finance (two of my personal favorites). If you don't know how, don't panic! Consult a financial planner or just ask for guidance in the comment section. Identify the top performers over the past 5 years. Real estate in 2007 has been a tumultuous up and down period, so base your results on a longer timeline. Go back 10 to 20 years if you so choose.
   
   For example, I have chosen the Prologis Corporation under the ticker symbol "PLD" that trades on the New York Stock Exchange, just like any other regular stock. They own about 2,500 industrial-associated properties all around the world.
3. Look up the stock symbol to see company's current price. In my example, the closing price for PLD on January 17, 2008, is $53.20.
4. Calculate how much money you will need to buy 100 shares and make your purchase. For PLD:
   
   100 shares x $53.20/share = $5,320
   
   To purchase 100 shares will require $5,320 plus a broker's commission, which can be anywhere from $4 for online brokers to hundreds depending upon your broker, so choose wisely.
5. Know what your are buying. PLD is a Real Estate Investment Trust, or REIT. REITs are companies that own and operate real estate properties that range from skyscrapers to farmland, which can generate income just like a second home at the beach to rent out during the summer to earn extra cash.
6. Calculate your compensation. In my example, PLD pays a dividend every 3 months as long as you hold onto your shares. For example, the payout each 3 months for 1 share of PLD for 2008 will be $0.5175 per share, and I bought 100 shares.
   
   100 shares x $0.5175 = $51.75
   
   But it pays this every 3 months, or 4 times each year. So:
   
   4 payouts x $51.75/payout = $207
7. Keep in mind your total value. Remember, I still own the actual shares of PLD as well, so I also need to calculate this value.
   
   In PLD's case for 2008, let's pretend to fast-forward. Say it goes up 10 percent from the purchase price, which equates to $58.52 per share. So not only do I get a nice little dividend paycheck of $207, but my total share price is now worth $5,852 for a profit of $532. In total, I made a pretax profit of $739.
   
   You're not Donald Trump, but you're on your way.

Tips & Warnings

• Make sure to thoroughly research any investment to serve your own best interests.
• Beware of anyone trying to sell you any type of advice, or pushing a membership fee for some type of investment club. If you have questions, just ask me and I will point you to some independent research sources.