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The Differences Between Equity or Mortgage REITs for Investors of San Diego Foreclosures and REO's.

You success when investing in San Diego Foreclosures and REO'S depends on knowing the difference.

There's an interim step before looking at individual REITs and their performance - understanding the differences between the two main REIT types: Mortgage REITs and Equity REITs.

• Mortgage REITs do not purchase, own or manage properties. Instead they own debt instruments, or in other words, they invest in mortgages on real estate properties. Though they have the properties as collateral for their invested loans, the mortgage REIT has no ownership position in the property itself. Though mortgage REITs can produce significant returns, sometimes in short time frames, they carry significant added risks. Generally, mortgage REITs are considered more for trading in the shorter term than the longer term holding strategy of the equity REITs.
  
  

• In contrast, Equity REITs own properties - or actually purchase, hold and manage commercial and rental properties. Though, in many instances, they will finance these properties, their primary focus is on profits acquired through acquisition and management of the properties.

Why are these differences so important for the REIT investor to understand? The risk and performance characteristics are very different.  Depending on your risk tolerance and investment goals, one of these REIT types will be the best fit for your portfolio. Though they act differently, most investors seem to most often invest in one or the other.

As an investor, research the characteristics of both Equity REITs and Mortgage REITs before selecting one in which to invest.

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