Short Notes vs REITs
Key Takeaways:
-
Short Notes provide predictable passive income, offering fixed-rate monthly returns with low minimum investments and short terms.
-
REITs generate income through real estate equity, providing liquidity and potential long-term appreciation but fluctuating with market conditions.
-
-
Choosing between Short Notes and REITs depends on goals, with Short Notes ideal for fixed returns and short commitments, while REITs suit those seeking liquidity and long-term growth.
From the beginning, real estate has been considered a solid, low-risk investment. Real estate is an attractive tangible investment because it appreciates, is an inflation hedge, often provides leverage and tax benefits, and can provide cash flow through rental income.
There are several real estate investing options, including:
- Owning rental property.
- House hacking.
- Flipping properties.
- Wholesaling.
- Purchasing a home.
- Short Notes.
- REITs (Real Estate Investment Trusts)
Real estate Short Notes and REITs offer passive income that is easier to make than other options like direct ownership or property flipping. Still, there are also key differences between the two. Let's take a look at Short Notes first.
What are Short Notes?
Think of Short Notes like you would a mutual fund. You select your Short Note, fund the investment, and enjoy monthly returns. Meanwhile, on the backend, Connect Invest manages your investment funds and utilizes them to fund first-position, collateral-backed active real estate developments across the US. As borrowers make interest payments to Connect Invest, our team redistributes that money to our investors through fixed-rate dividends.
At Connect Invest, your funds are spread across a diverse, extensive portfolio of first-position real estate loans - a different model from investing directly in real estate development through strategies like trust deed investing, where you are directly tied to only a single loan per investment.
Why do first-position, collateral-backed loans matter? Connect Invest utilizes investor funds through Short Notes exclusively for first-position loans because our loan originator and servicer, Ignite Funding, retains all legal rights over the loans. In the unusual case of a default, our close partner has the right to foreclose the property to recoup investor funds. Our loan originator is the first to recoup as much of their loan as possible before other creditors can get a piece of the pie.
Connect Invest's model provides investors with fixed-rate, monthly interest payments and annualized returns of up to 9%. This unique offering has short investment terms ranging from 6 to 24 months and a low minimum investment of $500. It is open to accredited and non-accredited investors.
The success of our Short Note portfolio is significant and continues to grow. The professionally vetted residential and commercial loans we invest in span acquisition, development, and construction phases across over 55+ cities in 14 states.
With a company mission of streamlining private real estate investing and making it accessible for all, our model has allowed investors around the US to diversify their portfolios by adding real estate development with just the tap of a few buttons. Our investors have praised Short Notes—listen to their success stories here.
Predictable, fixed-rate income, short investment terms of 6 to 24 months, and the low minimum required to begin investing combine to position Short Notes as a solid strategy to grow wealth.
What are REITs / Real Estate Investment Trusts?
A real estate investment trust (REIT) is a company that owns, operates, or finances real estate and produces income. It raises capital to do this by selling shares. REITs were created through law in 1960 to make real estate investing more accessible to smaller investors.
REITs allow investors to channel funds into income-producing real estate like office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans as easily as they would stocks and bonds.
REITs do not develop properties with the intention of reselling them like other real estate companies. Instead, their primary goal is to buy, develop, and operate properties as part of their investor portfolio.
Short Notes vs REITs
Short Notes and REITs are great ways to invest in real estate without having to shoulder the burden of buying a property. These investment strategies help protect portfolios through diversification. However, it's important to understand that there are key differences between them. Let's break it down.
Short Notes
- Investment type: Short Notes are a type of crowdfunding where investor funds are invested into collateralized first-position real estate loans.
- Returns: Investors earn passive income through higher-than-average, fixed-rate, monthly interest payments. Rates range from 7.5 to 9% annualized interest, depending on the term.
- Risk Level: While the SEC considers short notes high risk because they are unsecured, investor funds are used only for first-position, collateral-backed loans and are spread across a diverse portfolio spanning acquisition, development, and construction phases. This unique Connect Invest Short Notes model has lowered risk for investors.
- Liquidity: They are a fixed-term investment of 6 to 24 months with low liquidity.
- Minimum investment: The minimum investment of $500 provides good accessibility for investors.
REITs
- Investment type: Equity in a real estate company. Investors buy shares in the company that invests in income-generating property.
- Returns: While most returns, called dividends, are paid out quarterly, some are monthly or semiannual. investors are positioned to earn potential appreciation.
- Risk Level: Investors' risks depend on the market's performance. REITs fluctuate with the stock market.
- Liquidity: Because they are publicly traded, REITS have higher liquidity.
- Minimum investment: The amount varies, but investors should expect the amount to be higher than $500
Are Short Notes or REITs Better For You?
Thoughtful, informed investing is key to successful investing, and it's fair to ask, "Are REITs a good investment now? Or should I be leaning toward real estate Short Notes?" Investors should constantly evaluate their risk tolerance and have clearly defined investment goals along with a timeline for reaching those goals.
REITs are suited for investors seeking liquidity and the potential for long-term appreciation. On the other hand, Short Notes are a solid choice for investors looking for predictable returns and shorter time commitments.
Final Thoughts
Diversifying your portfolio through real estate investing adds a layer of protection to your financial portfolio. REITs have good liquidity and stable payouts, but their performance depends on market behavior, and the minimum investments and fees can be high. Short Notes, on the other hand, offer predictable, fixed-rate, monthly income with short terms, a low minimum investment, and no fees.
Sign up for our free webinar to learn more about Short Notes. Our experienced and professional team is ready to answer any questions you may have.