investment options
Access to property investment is well established, with a range of direct investment and crowd investment opportunities available to both retail and institutional investors. In the first instance, we need to look at the range of ownership sub-sectors available for consideration, and further investigate both direct and collective access points for the sector as a whole.
The main real estate subsectors that may be available to small investors are:
- Residential
- Commercial
- student housing
- care homes
- Hotels
- leisure tourism
- Development
- Agriculture
- forestry
Within each related subsector a range of potential entry points for investors; broadly classified as direct investment or collective investment. Collective investments are regulated or non-regulated fund arrangements, in which investors’ capital is pooled together to purchase a basket of assets or participate in a project with a large capital requirement. Direct investments, on the other hand, are simply direct acquisitions of real estate assets by the investor. There are, for example, funds for residential, student housing, commercial, and most other sub-sectors, and similarly, there are options for investors to directly purchase investment properties in each of these sectors through title deed. or lease.
Direct Investments – Simply the investor’s acquisition of real estate assets, direct real estate investments take many forms; the acquisition of real estate for improvement and sale; to acquisitions for lease/rental to a lessee or operator. For Investors with sufficient capital or funding, direct investments eliminate most of the risks specific to collective investment schemes where Investors rely on outside management of a real estate portfolio. However, direct investments carry specific asset risks; Owned assets can incur significant financial liabilities, including ongoing maintenance, taxes, and round-trip costs (the cost of buying and selling an asset).
Real estate investments, especially direct real estate investments, provide the investor with a level of security that paper investments are not simply due to the fact that quality real estate assets retain capital value over the long term, which in the case of Well-chosen properties in good locations are unlikely to go down and cause a loss of principal to the Investor. As long as the investor is prepared and able to tolerate the illiquidity associated with physically owned assets, this asset class offers true diversification from traditional financial assets such as stocks, bonds, and cash.
For the Direct Investor, particular attention should be paid to the due diligence process during the asset identification and acquisition stage, as in most regions this will require specific professional input from lawyers, surveyors, appraisal agents and, in the case of niche real estate investments. projects with a specific strategy Investors should also consider counterparty risk, as in many cases investors can rely on the performance of a strategy manager to achieve expected returns when investing in their strategy.
Pool Investments: Property funds come in all shapes and sizes, and invariably involve a fund manager purchasing a basket of properties in line with the fund’s investment strategy and managing those assets on behalf of investors in the fund. There are funds, both regulated and unregulated, that invest in all the major real estate subsectors. One can find opportunities to invest in residential real estate, student housing, nursing homes, commercial real estate, shopping malls, and real estate developments. Some of these funds cater only to large institutional investors, while others offer lower entry levels for smaller investors.
The structure of collective real estate investments varies from fund to fund. Some are highly regulated affairs established and operated by major asset management groups, others are small niche operations established to capitalize on current near-term opportunities or niche markets or sectors. Mutual funds can be listed on an exchange, allowing smaller investors to trade in and out of the fund as they please. This eliminates the potential illiquidity associated with the real estate asset class; however, this also substantially detracts from the returns generated by the underlying real estate assets, as some of the principal is never invested to ensure that redemptions can be made in cash without liquidating part of the underlying portfolio. .
Regardless of whether they are listed or unlisted, regulated or unregulated, collective investments in real estate offer access to the asset class for smaller investors, although in many cases the cash flow dynamics of securitized investments differ greatly from those of securitized investments. direct investments in real estate assets.
