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.
Land plus anything on it, including buildings and natural resources.
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