Investing Options
“How to Invest,” is a question that is misinterpreted by most real estate investment educational platforms. Indeed, there are a significant number of options for real estate investors that are not widely known. Historically, those who wanted to invest in real estate considered buying single- family homes, duplexes or small apartment buildings as their only investment option. What is unknown to the retail real estate investor is that there are many ways to invest in real estate completely outside of mainstream thought. There are so many different options, in fact, that it wouldn’t do them or the investor justice to discuss them here. More importantly, they don’t answer the question! The focus of investinrealestate.com is to educate the investor. Given that focus, we are not here to discuss what to invest in, but how to invest.
Making investment decisions in real estate requires the investor to consider its unique investment characteristics. Buying an apartment building, investing in a 7-11 store, or acquiring shares of a real estate investment trust (REIT), requires that you look upon the investment much like others in your portfolio while keeping the unique characteristics of real estate in the forefront of your strategy. Below is a partial list of items that we review with investors when we help them evaluate and create their real estate investment strategy:
- Asset Allocation: How much of their portfolio is currently invested in real estate?
- Risk Tolerance: Despite what many investors think, there are a lot of moving parts in a real estate investment. Hence, investing in real estate can be riskier than actually perceived in the market.
- Investment Objectives: Is the investors looking for growth? Income? Tax deferral? Do they want a speculative investment? Or are they looking for Core investments in real estate that might generate lower returns, but nonetheless, meet their objectives.
- Liquidity: Real estate is an illiquid investment. It is not bought and sold like a stock and hold periods are generally 3 years or longer. Thus, it is imperative that the real estate investor consider cash requirements across their entire portfolio when making an investment in real estate.
- Market Conditions: Market conditions drive many aspects of the real estate investor’s strategy. In a strong real estate market, real estate may need to be held for a longer period to get to return objectives. In bad markets, like the one we are experiencing, investors tend to look for speculative transactions that can take advantage of lower pricing.
There are many other ways to invest in real estate. It is important to understand the advantages and risks of each to determine which is most suitable for you. We can help you understand them, provide you with research that allows you to evaluate them more effectively, and decide which is most suitable for you.
