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New ways for Real Estate investments |
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The benefit of the diversification in real estate is found either at level inter or at infra-sector. This means that an optimal portfolio owes to be compose of shares, obligations and real estate properties, but the real estate component will subsequently be affected in typological and economic-geographical level inserting different type of properties (offices, shops, residences, etc.) situated in diversified territorial areas under the influence of heterogeneous economic factors. Such a diversification is not an easy target and requires the availability of consistent patrimonies to clarify the elevated unitary value of every real estate unity. As far as the second profile is concerned, the investment in real estate could be concretize in direct or financial form. In the first case the investor directly purchases the ownership of the property, while in the second case the allocation of resources is mediate from society structures that can be organized in function of different elements. The existence of a double option, is peculiar of the real estate compartment and produce two market segments of different institutional level: the private property real estate market and the equity real estate market. The owner option and the alternative society one are differentiated in operation of the institutional factors, of governance and of market that characterize them. In parity of other conditions, it has been underlined as the different intensity of how every formality of investment responds to the aforesaid factors engraves on the cash flow of the investor and on the cost opportunity of the allocated capital and, as a consequence, on the final value of the investment. More in detail, every different owner is relatively characterized for different degrees of property responsibility to the partnership liabilities of the real estate investment, of regulation cost of the intermediary model, of diversification by sector, of mechanisms of administration as well as of ability of control and incentive in monitoring the way the managers operate, as of costs of capital allocation, liquidity and transparency of the real estate activities negotiations object of investment. The net balance of the composite impact of the aforesaid factors on the cash flows and on the cost opportunity of the capital contributes to determine, also in differential terms, the profile of yield-risk of every form of investment.
For this reason it is reasonable to believe also that the bigger investors and asset managers, for instance the insurance companies, the foundations and the pension funds, that currently have important quotas of allocated patrimony in real estate, can mostly appreciate the benefits of the real estate financial investment, eventually revitalizing new financial tools, like mutual funds, structured according to organizational and corporate governance rules that answer to the requirements of institutional investors.
Free Spreadsheet for calculate the cash-flow in a RE investment Glossary of RE Terms
(source of the article is the book "L’investimento immobiliare – mercato, intermediari e forme proprietarie", Massimo Biasin, Il Mulino) |
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| Play the Life! creation - 2005 mail: info@playthelife.com | ||||||
The real estate market is
passing through a phase of important transformation that interests both
the logics and the formalities of investment. Under the first profile,
it is affirming the necessity to interpret in a coordinated way the
relationships that intervene between the real estate component and the
financial component of the portfolio of investment. From this point of
view, the real estate properties - that historically represent a
remarkable quota of the investors’ wealth, particularly of the
families’ - are not seen anymore how an aggregate separated from the
financial activities (shares and bonds), but as an universe of
investment that completes the asset allocation of a diversified
portfolio because of their low correlation with the other classes of
activity. This vision of integrated management modifies the view of
real estate investment evaluation that answer to typical financial
logics of the capital market. This passage asks for interpret the real
estate activities according to schemes of risk and outcomes that allow
to measure the concrete benefit of the diversification in real estate.
The respect of the attended output and the volatility of the investment
yields in the real estate results particularly difficult to explain
the scarce transparency of the property market that is based on rare
transactions and on values characterized by meaningful limits of
reliability in several countries. Therefore, unlike financial
activities, these the strength profile of risk and outcome of the real
estate properties is difficult to know with certainty, at least until
when the investment is sold.
In appraising the best
form of resources allocation in real estate, investors will
consider not only the yields but also the characteristics of every form
of investment, and then choose the one that better suits for their
demands and objective. The greatest transformations in action in the
real estate market concern the progressive diffusion of the ownership
in financial form. Such a formality of possession assures in fact a
separation of the activity of investment - represented by the stock or
quota of stock of the capital - from the underlined real estate. This
allows a greater liquidity and flexibility to the investment
management, lowering the partnership costs of portfolio transaction.
The process of real estate capitalizing activities is favorite through
the optimization of the organizational structure of the principals
society models - especially those of the real estate funds that
require more and more mechanisms of governance typical of the stock
company. The perspectives of growth of the real estate market concerns
on the ability of investment organisms in organizing the holding
companies, eventually traded in controlled markets, according to the
background model as to offer proper financial tools for real estate
activity and to manage in a professional way the patrimony to be
allocated. In affirming the financial ownership, a non marginal
assignment is given to active broker for the management of savings of
the private clientele that called to approach those clients to the real
estate investments through the insertion of quotas of real estate in
the property managements and in the consultation for the investments.
