Answer from Romana King, senior editor and real estate specialist at MoneySense: Over half a decade ago, financial planners and trusted portfolio advisors started to look for stable, steady returns that could actually beat inflation. The reason? Bonds yields were weak and the equity market was volatile. Their clients wanted stable returns that didn’t cap out at 2% per year. That’s when real estate started to flourish as a leading investment choice among high-net-worth (HNW) investors.
While decent yields were certainly an attraction, so was the ability to use leverage to an investor’s advantage. But just because HNW investors are still shopping for real estate investments, doesn’t mean Joe or Jane regular investor should. Truth be told, HNW investors aren’t always looking for a capital gain on their investment—which is the increase in sale price that usually provides the bulk of a regular Joe and Jane’s investment in a house or condo.
To fully appreciate why HNW investors are still in the real estate market, it’s best to learn the four investing methods they use when investing in this asset class.
1. Real estate as an income investment
The aim of an income investor is to optimize cash flow. This is when the cash made on the investment on an ongoing basis—either through monthly rent or yearly leases—is the focus of the investment strategy, not the long-term potential price appreciation.
This type of real estate investor is more concerned with stable, secure returns.
While income investment can focus on one building or development, it’s also prompted the creation and expansion of the Real Estate Investment Trust (REITs). REITs are a basket of equities. Yet, unlike traditional equity funds, a REIT’s core business and growth is based on net operating income of its property holdings (and to a lesser degree any potential appreciation in the value of these properties).
The great news is that income investing using real estate is accessible to both HNW investors and to ordinary investors, like you and me.
2. Short-term opportunity using real estate
Opportunistic investors have one goal: To maximize profits in the shortest timeframe. These HNW investors typically take on a great deal of risk in an effort to juice returns. A good ordinary-guy example of this style of real estate investment is the renovation contractor who buys a run-down bungalow with the intention of rebuilding and reselling. This “flipping” of an outdated residential home is usually done in a short timeframe with the sole purpose of making the most profit.
3. Longer-term big profit through buy-and-hold development
Someone once owned all the land that borders Highway 401. Now, there are housing developments, commercial stores and other amenities on either side of this very busy highway. Development investors aim to buy raw land, which they then develop into a major hub by building residential or commercial projects.
HNW investors that go into development must have deep pockets, though, as there are always unexpected and expensive setbacks. Still, the payoff can be substantial, with some investment advisors estimating a return as high as 50% for these types of projects.
4. Using debt to make money
The last way HNW investors will use real estate to juice their investment returns is to go into the money-lending business. Using their own capital, these investors fund mortgages or lend capital to developers and builders. In exchange, they get a bigger-than-bank-rate returns, as well as the security of an asset-backed debt. This is one of the most advantageous ways to invest in real estate, as private lenders can usually expect anywhere from 6% to 16% return on the money they loan out and the land or building is still collateral protection in case the borrower defaults on the loan.
How can I invest in real estate?
This all sounds great, but the real question is: How can I get in on it? I mean, who hasn’t suffered a bit of envy watching housing prices skyrocket in the last decade?
Truth is there is no simple answer to this question. Real estate investments, just like stock market investments, require due diligence and research. Any decision should be part of a larger financial plan—and no philosophy or scheme should be followed simply because it sounds good.
We have made a selection of various property markets (USA, Ireland …) that are currently ideal for long term investors and can give you a good 8-10% rental yield to increase your retirement income. Check on www.ourbestinvestments.org/real-estate/ for more info.
We select and display buy-to-let properties over 7% return in various countries. Whether you’re seeking rental yields or capital growth, investing in property is hard work. We look at whether you can really make buy-to-let investing work for you. If you are considering buy-to-let as a serious investment, then you’ll probably want to know one […]
Savings accounts or Term deposits with major banks are one of the most common and least risky ways to store your money for the short term. Credit unions and building societies also offer savings accounts. When you deposit money in an account you are lending it to the bank, which pays you some interest in […]
A managed fund is a financial product that buys a number of shares and other investments such as property, term deposits, and cash. The buying decisions are made by expert managers. When you buy units in a managed fund you are spreading your savings across a range of shares or other investments within the fund. […]
Lend to US real estate investors against full mortgage on the property for an annual rate of 10%.
This property is located in a busy vibrant part of Dublin City Centre, enjoying all the conveniences of the City Centre, in the Christchurch area and very close to Temple bar. The apartment is on the 1st floor and there is also a lift. Generally it’s in good condition throughout. The Hall, double bedroom and lounge areas are all laminate flooring, the kitchen and bathroom are tiled and the single bedroom is carpet. There is storage heating throughout. Both bedrooms have built in Wardrobes and there are two good size hall storage cupboards. A little downside to this one is there’s an automatic gate just under the window of the living area which makes noise on opening (it does not affect the bedrooms) and also the light is not great due to large buildings facing this apartment. However the upside is there is a lovely roof terrace (the first photo on the dropbox I sent you) located on the same floor which the two bedrooms overlook – this terrace could be used for BBQ’s etc and is an added bonus. The building is about 18-20 years old. In this area I believe it’s a perfect for a buy to let […]
talbot st, dublin
140k€ – 8% – Talbot Street
Description This 80k Loan is for a house near Miami evaluated at 160k$ recently. Investor is closing the sale shortly, wants to do some home improvements and resell it in a few months. Zillow link to the property here Investor Profile :
Village Of Palmetto Bay, FL 33176
80k$ – 10% – Loan
11-apr-16 The apartment is in Richmond Street. It is located at the back of the development. The condition is good and it is currently rented at €1200pm until June 2016. The market value however is in the region of €1500 per month. There is an allocated parking space and also attic space as the apartment is on the 3rd floor. I have attached some photos however they are not great (received from the agent who let the apartment) so we can arrange to show you the property at a time that suits. The price the vendor is seeking is €230,000. The management fees are in the region of €1650 (waiting on confirmation on this). The kitchen and the bathroom are both well used and need attention but nothing structural. With a good refurbishment (which we can arrange) costing between 5 and 6k we estimate this apartment will generate at least 1500 per month. Presently 2 beds in ok condition rent for 1400 without parking and usually one bedroom is substandard to the other which in this particular apartment is not the case. The yearly management fee is 2,200 which is at the upper end but is reflected in the […]
richmont street, dublin
230k€ – 7% – Richmond Street
This apartment is over 800 sq feet approx. Built 12 years ago – it’s a development in an old Georgian Building with the front remaining as Georgian and the interior modernised. It’s on the 4th floor and theres a lift. Enter the hall and the bathroom (with bath) is to the left – to the front are each of the 3 bedrooms – all 3 are double sized – (all with built in wardrobes) and to the right is the very large living/dining area which has the kitchen off. Find out more about the Property Market Overview, Transactions Cost and Processes etc…
Mountjoy Square, dublin
275k€ – 9% – Mountjoy Square
This spacious two bedroom ground floor apartment situated in a prime city centre location. The Old Distillery is adjacent to Smithfield Fruit Market, Law Library and Four Courts. The property is within easy walking distance of city centre and surrounded by excellent social and essential amenities including public transport with Luas Red Line Four Courts Stop. Ideal opportunity for first time buyers or an investor. Property will benefit from some minor upgrading which will offer excellent rental return due to demand for properties in the area. In this area I believe it’s a perfect for a buy to let. I have no doubt that if approx €4500 was spent on refreshing it, it would be beautifully presented for letting. The rent achievable at present would be approx €1,450 – €1,600. The annual maintenance fees are approx €1500. It’s on the market for €169,000 and there is an offer for €172,000. Secured gated development Communal garden UPC wired Small Balcony Double glazed throughout Accessible ground floor aspect Close to excellent public transport Current management fee C.1500 per annum Internal Floor Area circa 700sq.ft (65sq.m) Entrance Hall Storage press, hot-press, wood floor, intercom, alarm panel. Kitchen Lino floor, fitted kitchen units, hob […]
he Old Distillery, Smithfield, Dublin 7
172k€ – 9.5% – Smithfield
A first floor, two bedroom apartment in a most convenient location, close to Smithfield Market. The accommodation comprises a bright living / dining room, kitchen area, bathroom and two double bedrooms. The property comes to the market with one designated underground car parking space. The location of this apartment could not be better. Situated on Brunswick Street next to Smithfield Market a host of amenities are provided for including a supermarket, cinema, medical centre, bars and restaurants. Dublin City Centre is only minutes’ walk away and the area is well served by public transport, with the Luas red line running through Smithfield, and numerous busses available on Arran Quay. In this area I believe it’s a perfect for a buy to let. I have no doubt that if approx €4500 was spent on refreshing it, it would be beautifully presented for letting. The rent achievable at present would be approx €1,450 – €1,600. The annual maintenance fees are approx €2500. It’s on the market for €175,000 and on that basis and the fact that these properties are in short supply, I recommend that we offer this amount. Entrance Hallway – 1.80m x 0.85m L shaped entrance hallway Inner hall – […]
Brunswick Street, Dublin 7
175k€ – 9% – Brunswick Street
This property is located in Belgium. Pagodas near the Japanese Tower , the 4th floor and top floor of a small building with low charges , nice apartment of ± 95m² consisting of: entrance hall with security door , cloakroom , wc , living 35m² , kitchen, 2 bedrooms, bathroom, terrace. Transaction costs + repairs are evaluated at 23,950€ Besides rental income , our experts believe it is reasonable to expect a capital gain 3.5% / year for 10 years considering the Belgium property market : Property prices in Belgium are rising again, after a short-lived decline in the first half of 2014. Nationwide, Belgian house prices rose by 1.13% (1.23% inflation-adjusted) y-o-y in 2014, based on Statistics Belgium figures. On a quarterly basis, house prices increased 1% (1.1% inflation-adjusted) in Q4 2014. more to be found here YOUR ANNUAL TOTAL RETURN : ( Rental income + gain annual average) 4.24% + 3.5 % = 7.74%
165k€ – 8% – LAEKEN
The advantages of Luxembourg life insurance With a clear and detailed legal framework, life assurance is internationally recognized thus providing a safe and efficient asset transfer vehicle. In addition to its general characteristics, Luxembourg life assurance offers a number of advantages. A legal framework providing the policyholder with the highest levels of protection A client of an insurance company in the Grand Duchy of Luxembourg benefits from a legal protection regime unique in Europe, adding a true advantage in asset security. The principles established by Luxembourg regulations are as follows: The choice of a custodian bank is subject to the supervisory control of the insurance commission authority (CAA – Commissariat aux Assurances). A tripartite agreement must be signed between the Luxembourg insurance company, the custodian bank and the CAA. The custodian bank is required to keep the client’s assets segregated from its own and is legally bound to protect the interests of the policyholder, by reporting to the CAA any irregularity of the insurance company likely to weaken the Super Privilege. The “Super Privilege” ensures the rights of the policyholder in the event of the company’s default, and takes precedence over all other creditors (Luxembourg Treasury, Social Security, company employees). […]
Luxembourg Life Insurance – 2.5%
Great investment! If you are looking for a place called home or to build your investment portfolio, this home has both.! Offering a nice sized lot with a fenced in back yard and a covered patio. The 2 bedrooms and 1 bath, a family room and eat in kitchen give you lots of space to move around. The all tile flooring makes a nice touch too! Facts Lot: 6,072 sqft Single Family Built in 1955 Cooling: Central Heating: Wall Features Flooring: Tile Parking: Off street Find out more about the Property Market Overview, Transactions Cost and Processes etc…
E Crawford St, Tampa, FL 33610