Real Estate Investment Essay examples

3614 Words Nov 11th, 2012 15 Pages
Real Estate Investment analysis

Real Estate has evolved as the most profitable business over the years for those who can invest heavily in land or property and wait for their increase in value. However, the property may fetch instant cash in exceptional times like the sudden increase in value due to market reasons such as experienced just before the global financial credit crunch or due to the property’s unique location. This is classified under the short term type of real estate investment. The classification is based on the relative time spent to consolidate worth. The long term type of real estate investment therefore means that the owner has to wait for longer for the property or land to consolidate worth. (Isaac, 1998).
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(Malpezzi, Stephen, 2010). Indirect investment has the ability to avoid to a large extent some of the challenges facing direct investment as highlighted above while still investing in the property market. Indirect real estate performance has been found to lead direct property performance. It has also been found that direct real estate performance is important in explaining indirect real estate performance Indirect real estate performance has greater relationship with equity market factors compared to direct real estate performance. A positive relationship has also been found between direct real estate performance and stock market performance. It is suggested that both types add diversification benefits to a multi-asset portfolio.

Types of Indirect Investment

Indirect investment usually involves the division of property debt or property equity to create paper assets which may then be bought or sold in a separate market such as in the stock market. In the UK, property companies are public companies and as such do not have particular legal form or specific tax advantages. The Financial Times quoted in mid 1995 the capitalization of property company shares at 16.1 billion sterling

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