The financially savvy know the power of diversification. It is important to make sure your portfolio has more than just stocks and bonds. Another important part is often real estate. Owning real estate can extend beyond the traditional primary home or vacation property. It can also include mortgage funds and passive investments.
What are passive investments?
Passive real estate investments are growing in popularity throughout the country as a viable alternative to stocks in a relatively volatile market as real estate tends to offer a more predictable and stable investment option. This investment strategy generally involves serving as an investor in another party’s real estate deal. This could include investing in a group looking to set up an apartment or condo complex.
Underwriting is an important safeguard when taking on passive real estate investments.
What is underwriting?
At its core, underwriting is the review of the risk involved in the investment. Underwriting for passive investments can include underwriting the financials as well as the management team. Underwriting for real estate loans or mortgages can include a review of the finances of the potential buyer as well as an appraisal of the home and a title search.
Although underwriting services can be tailored to each individual transaction, it is important to note that a failure to properly underwrite a deal can led to disaster. The mortgage crisis is a prime example. Investors are wise to take steps to protect their interests and mitigate the risk of poorly executed underwriting services by using professionals with experience in this niche area of real estate law.