One of the beneficial features of real estate is that it produces fairly consistent total returns that are a hybrid of income and capital growth. In that logic, real estate has a coupon-paying bond-like component in that it pays a regular, steady income stream, and it has a stock-like component in that its importance has a propensity to fluctuate. And, like all securities that you have a long position in, you would prefer the importance to go up more frequently than it goes down! Please check out M City Condos by Rogers Real Estate, it has great leverage luxury project with big upside potential.
- Other Characteristics
Several of the other characteristics that make real estate exclusive as compared to other investment alternatives are as following:
- No fixed maturity
Unlike a bond which has a set maturity date, an equity real estate investment does not normally mature. In Europe, it is not special for investors to hold property for over 100 years. This attribute of real estate allows an owner to purchase a property, execute a business plan, then dispose of the property whenever appropriate. An exception to this quality is an investment in fixed-term debt; by definition a mortgage would have a fixed maturity.
Real estate is, well, real! You may visit your investment, speak with your tenants, and show it off to your family and friends. You may see it and touch it. A result of this attribute is that you have a certain degree of physical control over the deal – if something is wrong with it, you can try fixing it. You can’t do that with a stock or bond.
- Requires Management
Since real estate is tangible, it needs to be managed in a hands-on manner. Tenant complaints must be addressed. Landscaping should be handled. And, when the building starts to age, it wants to be modernized.
- Inefficient Markets
An ineffective market is not necessarily a bad thing. It just means that information irregularity exists among members in the market, allowing greater profits to be made by those with special information, knowledge or resources. In distinction, public stock markets are much more efficient – information is well dispersed among market participants, and those by material nonpublic information are not permitted to trade upon the information.
- High Deal Costs
Private market real estate has high purchase costs and sale costs. On purchases, there are real-estate-agent-related charges, attorney’s fees, engineers’ fees and many other costs that can raise the efficient buy price well beyond the price the seller will actually receive. On sales, a substantial brokerage fee is generally necessary for the property to be properly exposed to the market.
- Lower Liquidity
With the exception of real estate securities, no community substitute exists for the trading of real estate. This makes real estate more difficult to sell because deals should be confidentially brokered. There can be a substantial lag between the time you decide to sell a property and when it really is sold – generally a couple months at least.