A community development trust is a real estate investment trust that focuses on properties that benefit the community, allowing investors to earn money while also contributing to social improvement. It can invest in various projects, such as low-income housing or disaster reconstruction, and must comply with the Community Reinvestment Act.
A community development trust is a type of investment opportunity that focuses on real estate and is also designed to provide a benefit to the community at large. It is a specific type of real estate investment trust, or REIT, that focuses its investment on the types of real estate that will help downtrodden members of the community or improve the quality of life in the area. Investors in a community development trust earn money through interest on mortgages purchased by the trust or through equity in properties owned by the trust. Such trusts must be consistent in their efforts to help the community through the types of investments that are chosen.
Many investors are concerned not only with the profitability of their potential investments but also with how their money is used. Those investors might be just as eager to see their money go to the betterment of society as they are to make a lot of money. The concept of social improvement through investment money is at the heart of a community development trust, which combines typical real estate investing with philanthropic motives.
In most cases, a community development trust is set up much like any other real estate investment trust. Investors can buy shares of the trust on the open market or buy into a mutual fund that focuses on real estate. A trust can invest in capital by buying homes or rental properties. You can also include the investment of debt with the purchase of mortgages from other lenders.
When the real estate market is in good shape, these REITs can be extremely profitable for their investors. A community development trust focuses these profitable investments on those real estate opportunities that have a positive impact on society. In the United States, such trusts generally have to be in accordance with the Community Reinvestment Act, an act of Congress that provides that investments be focused and available to all parties in society, regardless of their social position or circumstance.
As such, a community development trust can choose from a number of investments designed to improve living conditions in a specific community. It could work to provide low-income housing for a community with many poor citizens. The reconstruction of a community affected by a natural disaster is another example of how a trust can benefit society. In this way, investors in a trust can try to help communities and people in need while meeting their own financial concerns.
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