There are, in fact, two main ways that one can attempt to profit from the buying of real estate. The most obvious of these is the physical purchase of a property or land by an investor who is looking to gain from either capital appreciation or rental income, or both. However, this is not always straightforward. Depending on the investor's country of residence and the jurisdiction where he or she chooses to buy real estate, a whole host of tax and legal obstacles may come into play.
There is another, more indirect route, and that is to buy shares in a property fund or trust. Along with the growth in the alternative investment and hedge fund sector in the post-dotcom financial landscape, property funds have become an increasingly popular vehicle for both individual and institutional investors.
Another commonly used indirect investment mechanism is a real estate investment trust, or Reits as they are known in the United States and elsewhere. Reits are to be found in many jurisdictions and are broadly structured along the lines of the US model where a company must distribute at least 90% (this level varies depending on the country) of its taxable income to its shareholders annually to qualify as a trust.
Reits offer investors the advantage of greater diversification through investing in a portfolio of properties rather than a single building. Another plus point (or minus point depending on one's own experiences!) is that management of the trust is undertaken by experienced real estate professionals.