What Is a Real Estate Capital Market?

A real estate capital market consists of individuals and institutional investors that invest money either directly or indirectly into real estate. Construction firms are heavily reliant on cash infusions from the capital market to finance work on new and existing buildings. Since real estate investments are secured by property or mortgages, the real estate capital market normally exposes investors to lower levels of risk than investments in unsecured capital markets. Sponsored by Revcontent The Close Relationship Between Stress and Sleep The Close Relationship Between Stress and Sleep Purple Did Your Mom Ever Make the Paper? Search Newspapers.com Did Your Mom Ever Make the Paper? Search Newspapers.com Newspaper.com Direct investments in the capital market often involve real estate investment trusts (REITs). When investors buy shares in a REIT, the share sale proceeds are used to buy commercial or residential real estate. Normally, a single REIT owns a wide variety of property located in different locations so as to protect investors in the event that real estate prices decline in a particular market. Investors receive dividends that are comprised of rental income or the profits generated by property sales. REITs help to drive the real estate market because construction companies can sell properties to these funds and use the sale proceeds to fund the construction of new developments. Real estate capital market. Real estate capital market. Aside from buying real estate, some REITs invest in commercial or residential mortgages. The interest payments on the underlying loans are passed on to the REIT’s shareholders as dividend payments. In most instances, REITs buy large pools of mortgages from investment companies and these firms use the sale proceeds to finance more loans. Real estate purchases tend to increase when financing is readily available which means that REITs indirectly bolster the real estate capital market. A real estate capital market consists of individuals and institutional investors that invest