Exploring Real Estate Investments
  1. Exploring Real Estate Investments: Introduction
  2. Exploring Real Estate Investments: What Is Real Estate?
  3. Exploring Real Estate Investments: Types Of Real Estate
  4. Exploring Real Estate Investments: Characteristics Of Real Estate Investments
  5. Exploring Real Estate Investments: Advantages And Disadvantages
  6. Exploring Real Estate Investments: Buying And Owning Real Estate
  7. Exploring Real Estate Investments: Finding Investment Value
  8. Exploring Real Estate Investments: Conclusion

Exploring Real Estate Investments: Introduction

By Ian Woychuk, CFA

Chances are, when you think about investing in real estate the first thing that comes to mind is your home. For many people, their home is the single largest investment they will ever make. But have you ever stopped to consider that once you purchase a home it becomes part of your overall portfolio of investments? In fact, it's one of the most important parts of your portfolio because it serves a dual role as not only an investment but also a centerpiece to your daily life.

Though a home is one of the largest investments the average investor will purchase, there are other types of real estate investments worth investing in. The most common type is income-producing real estate. Large income-producing real estate properties are commonly purchased by high net-worth individuals and institutions, such as life insurance companies, real estate investment trusts (REITs) and pension funds. (To read more about REITs, see What Are REITs?, Basic Valuation Of A Real Estate Investment Trust (REIT) and The REIT Way.)

Income-producing properties are also purchased by individual investors in the form of smaller apartment buildings, duplexes or even a single family homes or condominiums that are rented out to tenants. (To find out more about being a landlord, see Tips For The Prospective Landlord, Tax Deductions For Rental Property Owners and Investing In Real Estate.)

In the context of portfolio investing, real estate is traditionally considered an "alternative" investment class. That means it is a supplementary investment used to build on a primary portfolio of stocks, bonds and other securities.

One of the main differences between investing in a piece of real estate as compared to stocks or bonds is that real estate is an investment in the "bricks and mortar" of a building and the land it is built upon. This makes real estate highly tangible, because unlike most stocks you can see and touch your property. This often creates substantial pride of ownership, but tangibility also has its downside because real estate requires hands-on management. You don't need to mow the lawn of a bond or unplug the toilet of a stock!

In this tutorial, we will discuss the types and characteristics of real estate, things to think about when buying and owning property, and the rationale for adding real estate to your portfolio.

Exploring Real Estate Investments: What Is Real Estate?

  1. Exploring Real Estate Investments: Introduction
  2. Exploring Real Estate Investments: What Is Real Estate?
  3. Exploring Real Estate Investments: Types Of Real Estate
  4. Exploring Real Estate Investments: Characteristics Of Real Estate Investments
  5. Exploring Real Estate Investments: Advantages And Disadvantages
  6. Exploring Real Estate Investments: Buying And Owning Real Estate
  7. Exploring Real Estate Investments: Finding Investment Value
  8. Exploring Real Estate Investments: Conclusion
RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Investment Real Estate

    Real estate that generates income or is otherwise intended for ...
  3. Commercial Real Estate

    Property that is used solely for business purposes. Examples ...
  4. Private Equity Real Estate

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  5. Financial Management Rate Of Return - FMRR

    A metric used to evaluate the performance of a real estate investment ...
  6. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through ...
RELATED FAQS
  1. How can I make equity investments in real estate?

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  2. Why can real estate be a good addition to a traditional stock and bond portfolio?

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  3. Is a REIT a type of ETF?

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  4. How does the risk of investing in the real estate sector compare to the broader market?

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  5. What is the difference between an Equity REIT and a Mortgage REIT?

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  6. What factors drive share prices in the real estate sector?

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