Exploring Real Estate Investments: Conclusion
By Ian Woychuk, CFA
We've covered quite a few points throughout this tutorial. Below are some of the main points that were made along the way:
- Real estate investments fall into one of the four following categories: private equity, public equity, private debt and public debt. Your choice of which one to invest in depends on the type of exposure you are seeking for your portfolio.
- You can invest in either income-producing properties or non-income-producing properties. Any leased property is income producing, and vacant properties are non-income producing. You can still earn a capital return on a non-income producing property, just as you would on an investment in a home.
- The major types of investment properties are offices, retails, industrials and multi-family residential properties.
- Real estate can produce income (like a bond) and appreciate (like an equity).
- Real estate is tangible, so it requires ongoing management. On the other hand, you also have an increased ability to influence the performance of a single investment as compared to other asset classes.
- Some of the benefits of adding real estate to a portfolio include: diversification, yield enhancement, risk reduction and inflation-hedging capabilities. However, real estate also has high transaction costs, can be difficult to acquire and it is challenging to measure its relative performance.
- Buying real estate requires substantial due diligence to ensure that you're getting what you expect after you close.
- The way to determine the value of your property (other than actually selling it) is to have it appraised by an accredited appraiser.
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