Real Estate investments across the world have diversified beyond "Unit-By-Unit, But-to-Let, Self Use" categories. Pandemic catapulted screen time and fuelled all time high Property Search scores across continents.
Investors wanted deals, diversification & dividends while covering all plausible risks. Emerging Real Estate investment categories showed the way and became quick favorites!
Learn more about them in this slideshow....Happy flipping!
3. • One of the biggest misconceptions about real
estate investing, “Investors need to put
substantial amounts to make money”.
• Direct real estate investment has been the
number one choice for decades with relatively
easy access to capital. However, liquidity
remains the key disadvantage.
• So the usual questions which arise while
investing in real estate are
• With what sum can a real estate investment start?
Can one invest as low as $500 in property and get
consistent returns from it?
• Can they control their investments & have quicker
liquidity?
• Can they get returns in double digits with a regular
income and gains on a well timed exit?
• The answer to all of the above is YES!
• Lets discover the emerging Real Estate
investment types and understand how they
work.
3
EXECUTIVE SUMMARY
4. REAL ESTATE INVESTMENTS
Fall Under 4 main categories
➢ Direct investment in real estate – Unit by Unit,
Buy to Let, Rental Income, Self Use.
➢ Investment in Real Estate Investment Trusts
(REITs) – Equity or Mortgage REIT, Traded on
stock exchange.
➢ RE* Private investment funds – Open largely to
HNI investors, High Minimum investment,
usually co-financed with debt.
➢ Real estate crowdfunding – Funds from multiple
investors, Diversified portfolio, transparency &
control.
Let's look at them one on one along with their
risks & rewards.
4
*RE-Real Estate
5. CATEGORY 01 – DIRECT
INVESTMENT
Investor Objectives : Income Through Rental
and or Resale
Most common method of purchase : Mortgage
which is usually defined by the term leverage.
Rewards
↑Income : Low yield 2-4% gross.
↑Resale/Exit : market driven, no or low data
analysis, ill-timed.
Risks
↓Liquidity : complex & time-consuming process
with Multiple stakeholders.
↓Financing Risk : Economic downturns can
wreak havoc on timely payments, one can
loose the property!
↓Property management : idle time, unreliable
tenants, upkeep & renovation can eat into
returns. 5
6. CATEGORY 02 – REIT
Investor Objectives : Liquid investment,
tradeable on stock exchange.
Most common method of purchase : Equity
Shares or debentures via REIT funds and or the
stock exchange.
Rewards
↑Income : Annual Dividends, 7-14% gross.
↑Sale/Exit : High liquidity, traded as shares on
exchange.
Risks
↓Price volatility : directly tied to market index,
even if real estate market is stable volatility in
securities market will impact REIT.
↓Structural Risk : They are equities not bonds
so carry the risk like all equities.
↓Excessive reliance on capital markets REITs
can be overpriced and thus put dividend value
at risk. 6
7. CATEGORY 03 – PRIVATE
INVESTMENT FUNDS
Investor Objectives : hands-off investment, high
income.
Most common method of purchase : Private
Funds.
Rewards
↑Income : 10-18% gross, depending on fund
risk level.
↑Resale/Exit : Investor / Fund driven.
Risks
↓Loss of capital : During periods of market
uncertainty, high unemployment, or other
macroeconomic events that come with
financing risk.
↓Highly Leveraged : Most of the funds are
highly leveraged so past performance is no
indicator for future returns.
7
8. CATEGORY 04 – REAL ESTATE
CROWDFUNDING
Investor Objectives : Low investment high returns,
transparency, liquidity, control.
Most common method of purchase : AMC’s – Asset
management companies/platforms, Fractional Real
estate players, Real estate developers
Rewards
↑ Income : High yield 8-16% & cap gains resulting in
IRR of 16-22%
↑ Resale/Exit : sell stake anytime in secondary
market, complete control, data driven exit
approach.
↑ Diversify : with low entry levels investors can
diversify into multiple countries & assets including
specific Purpose-Built asset class funds.
Risks
↓ Investment Duration : To maximize returns,
platforms might like to hold exits. This to some
investors is not a preferred scenario. 8
13. CROWDFUNDING INVESTMENT PRODUCTS
BUY-TO-LET
Pre-Leased Property
Acquired through Crowdfunding
Managed by Asset management
Company
Low Risk - Investors get equity
shares as per unit/s of
investment
Can be a debt structure with
debentures listed on Demat
account
Rental Yield & Cap
Appreciation - IRR 14-18%
FIXED INTEREST
DEVELOPMENT LOANS
Crowdlending to developers
through platforms
In the form of NCD/CCD’s –
Necessarily / Compulsorily
convertible debentures
Fixed interest rate during
tenure
Low Risk - Backed by collaterals
– 1.5-2 times of Investment
Short duration – 2-4 years
Interest Income & Price Upside
- IRR 16-20%
PROFIT PARTICIPATORY
EQUITY INVESTMENTS
Returns as per outcome of the
project
Bullet payment schedule as per
project stages
Principal payment at the
completion of project
High Risk & Reward Investment
Outcomes could vary basis
project lifecycle & developer
Annual Interest Income
- 12-20%
13
14. GLOBAL RE CROWDFUNDING OUTLOOK - 2021-28
120741 101322 113000
851300
-100000
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
2019 2020 2021 2028
GLOBAL RE CROWDFUNDING BY VALUE (MN
USD)
North America,
28%
Europe, 11%
APAC, 53%
Latin America,
5%
MEA, 3%
PROJECTED MARKET SHARE BY REGION -2028
14
CAGR – 33.4%
Source : Industry & primary sources, Research Nester
15. GET MORE WITH
REAL ESTATE
INVESTMENTS
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HTTPS://WWW.MARKETPLACE.GRAVITYPROP.COM/
