INVESTMENT PROPERTY STRATEGIES
Adding real estate to an investment portfolio can provide some nice diversification and quite possibly, greater returns than can be found in competing asset classes. For the past few years, savings accounts and other short-term instruments have generated very paltry (sub-1%) returns. With stocks (equities), which have done very well the past several years, your investment is completely dependent upon someone else’s vision and performance, which is not always in alignment with yours. Real estate is unique in that you have a tangible asset backing your investment.
With real estate, there are many different ways to invest, depending upon how much of an active role you would like to take. On the totally passive side, you can invest in a publicly-traded REIT or a private fund that will hopefully generate periodic cash flow to distribute to its members. Of course, this is akin to buying stocks, whereby you don’t have control of the asset or how it performs. On the other extreme, you can personally buy investment property and be the 100% active manager of that property. Keep in mind this active approach, which has a lot of potential upside that you have the ability to impact, requires a great deal of constant management of the property. This is true even if you have a dedicated property manager, because you will need to “manage” that manager!
For many busy people, a nice compromise between the totally passive and active approaches is to join a small investment group that purchases, manages, and eventually sells properties. With this approach, you can make an active decision whether you want to participate in the purchase of the property being offered and then rely on the general partner to manage the property after purchasing it. With this approach, you can greatly minimize your time commitments as the general partner will be making the management decisions. Yes, you will still want to analyze your periodic reports, but as long as you have a diligent, trusted general partner, you should have minimal time intervention.
Regardless of what investment vehicle best suits you, real estate should be a part of any serious investor’s portfolio.
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