Investing in Real Estate : How is it different from other alternative Investments?Kapil
-Andrew Carnegie “The major fortunes in America have been made in land.”
-John D. Rockefeller “I would give a thousand furlongs of sea for an acre of barren ground.”
-Shakespeare “Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
-Marshall Field “The best investment on Earth is earth.”
-Louis Glickman, American business executive
So, obviously, real estate can be a good investment, provided the investment is planned properly.
How RE is different from any other form of alternative assets?
– There is Low correlation with equities in the short run only
– However, Both equities and RE are adversely affected in a recession
– RE investments produces apparent low volatility
– Location specific investments – The local factors affect the real estate prices a lot more than global factors (unlike commodities, stocks, gold etc which are impacted by global macro economic factors)
– Interdependence of land uses
– Large transactions which are typically leveraged by use of substantial amount of debt.
– RE investments typically habe long gestation period
Here are some of the reasons for Including RE in Investment Portfolio :
– RE investments can produce high absolute returns
– It is a Hedge against inflation
– Portfolio is diversified to reflect overall investment universe
– It provides tax benefits – may not be available in any other alternative investments
– Suitability to various investors
– Risk tolerant investor
– Risk-sensitive investor
– Inflation sensitive investor
But as Raplh Waldo Emerson says “Fear always springs from ignorance”…. The first thing is to obvious do a lot of planning and become aware about the purpose of investments.