350 Orchard Road
#14-06 Shaw House
Real Estate investment is the purchase of property to generate income and value. It is important to understand the methods, benefits, regulations, and limitations of investing in Real Estate and REITs (Real Estate Investment Trusts).
There are multiple ways that individuals and businesses can invest and profit in real estate, namely –
Buying a plot of land or property is one of the most straightforward and common ways to become a landlord and invest in Real Estate today.
“Landlords grow rich in their sleep.” – John Stuart Mill
It provides you with possession of the title deed and all rights associated with the land or property.
A common strategy in the field of Real Estate is flipping properties, i.e., buying commercial or domestic housing at rates that are undervalued, performing the required renovations and improvements to sell at a higher price.
The investor creates value by painting the property, adding features and amenities, and overall improving the state of the Real Estate as compared to how it was purchased.
Sources have shown that renovating and flipping Real Estate earns investors an average gross profit of 36.7% on their investment.
REITs are a great way for one to gain exposure to volatility and upward momentum in the value of the Real Estate market, without actually having to purchase any land or buy a house.
Instead, individuals and businesses can invest in REITs that allow investment appreciation and dividends in accordance with the housing and property market. An added benefit of REITs is that they are much more liquid than traditional brick-and-mortar Real Estate.
Real Estate has performed consistently over time to provide reliable gains with moderate volatility.
While it does have a historical reputation of comparatively slower returns, Real Estate is a lucrative space for investors because it offers unmatched security in the fact that property is a real, tangible asset that can generate income while steadily appreciating in value.
“Ninety percent of all millionaires become so through owning real estate.” – Andrew Carnegie
While the issue of being matched with a buyer or seller is mostly mitigated in today’s digital world, the regulatory limitations still exist. In India, Real Estate is regulated by The Real Estate (Regulation and Development) Act, 2016.
Due to safety reasons, many countries have strict requirements for their citizens’ abilities to own property.
In addition, when it comes to investing in Real Estate, there are certain limitations to be aware of –
Housing and Commercial property are less liquid than other asset classes like stock and precious metals. This means that it is more complex to buy and sell because of legal and regulatory requirements.
There are several benefits to investing in Real Estate –
One of the most compelling reasons to invest in Real Estate is its potential to produce rental income.
Once a property is purchased, it can be rented or leased to house a third-party or provide commercial space for a business.
Real Estate can be viewed as a safe haven as compared to the volatility of stocks. The reason for this is because the housing market and REITs, as a whole, are less volatile than the stock market.
“The best investment on Earth is earth.” – Louis Glickman
Real Estate can be used as collateral to obtain credit against the value of the property from banks and financial institutions.
Research shows that while REITs and the stock market currently share a positive correlation, it varies wildly between a coefficient of 0 (no correlation) and 0.90, or a nearly perfect positive correlation, over time.
Overall, Real Estate and REITs are considered less volatile, reduced-risk investments because of their ability to hold value and their proven track record for stability.
Real Estate is perceived as a safe haven asset in times of economic downturn. The graph above, depicts that while the market experiences periods of contraction, Real Estate sales are affected, however historically they have recovered rapidly.
Traditionally, in periods of uncertainty and recession, investors turn to real estate to provide them with the safety net of stability and reliability.
When looking for a company to invest in, there are a few key things to look out for, namely –
Once you have a good idea of a company’s past performance, it is easier to visualize the profit potential that your investment in the target company can create.
“Buy land, they aren’t making anymore of it.” – Mark Twain
Also, it is essential to take note of any government regulations that may apply to your investment and adhere to them.
When investing, the key is to be able to access as much information as to help you make an informed decision.
Housing and Commercial Real Estate are great investments known for their long term stability and significant profit potential.
We have seen how well Real Estate holds up during periods of market recessions, and that it is definitely worth investing in Real Estate for the long term.
REITs offer unmatched security because it gives exposure to capital appreciation in the value of Real Estate assets without needing to physically own the property. This helps investors avoid liquidity and capital issues while investing in the property market.
Private Investment in Public Equities (PIPEs)
Stages in Private Equity Financing
Co Invest Strategy
Real Estate investment is the purchase of property to generate income and value
Real Estate has evolved into an essential asset class to investors around the world.
A look at the average monthly rents worldwide for 2020 shows a glimpse of why investors choose Real Estate for its ability to produce rental income.