Real Estate - Investment

Diversity from Stocks & Bonds

This second of three blogs on real estate will focus on using real estate as a means of diversifying beyond stocks and bonds into real assets.

This blog’s group of readers includes several people who already are diversified into real estate beyond their own home.  These people have 1, 2, 4, 10, even 20 properties that they own directly as a main business, a side business, or a small-scale investment.  All of them are good.  My compliments to you.

Here’s some food for thought on different ways you can make a real estate investment.

Direct ownership:

Direct is the best type of real estate investment because you directly control decision-making, and I believe this is also one of the few relatively safe places to leverage debt to create net worth over time.  You can either operate the property yourself or choose to pay a manager for the property’s operation needs.  Both are good options, whatever suits your interests and life circumstances.

Trusts outside the market:

Real Estate Investment Trusts (REITs) have become a popular means of gaining real asset diversity for your investment strategy.  Accessing these privately, outside the stock market is available to Accredited Investors in Canada.  You are one of many owners who have pooled their funds in a trust.  The pooled funds increase the investment options to include larger apartment buildings, condo buildings, commercial buildings, industrial buildings, storage facilities, etc.  You have relatively little say in decision-making, no say in operation, but relatively more liquidity than direct ownership and without the volatility of the stock market.

Trusts in the market:

Many REITs can be found on the Canadian stock market.  Like the private trusts, your funds are pooled and give nearly unlimited options, little say in decision-making, no say in operation, but with very high liquidity and higher volatility.

Good and Bad Markets:

With Canada experiencing a serious housing shortage, existing homes, apartments, and condos all offer safety for your invested capital.  The new development of residences is relatively less safe as the risk of prices dropping over the duration of the development could place your capital at higher risk of loss.  And I believe any fund which is active in commercial offices is a risk as society continues to figure out the post-covid work from home phenomenon.

Summary:

If you don’t have any real estate diversity, I recommend you research how to get some.  I’d be happy to help.