WHY Property? What makes Real Estate an Attractive Asset Class? Residential or Commercial...

05/06/2020 15:08 By Team GIC
The number #1 factor although amongst several others that makes real estate, commercial or residential a super attractive asset class is its Tangibility - it is secured  by a physical asset, making it not only overwhelmingly stable investment, but also a psychological as well as practical safe heaven for capital with various additional benefits. The general trend over time is that real estate will not only retain its value, it will more than likely appreciate in value, which in some cases significantly. 

1. Residential housing, is a universally global basic human need. 
Whilst property is not a liquid asset class, it is an investment well suited to long-term hold strategy which also makes it perfect for wealth preservation. 
"People will always need a place to live." 

2. Risk Mitigation 
Because of real estate's nature as a physical asset, as long as investors regularly conduct  property maintenance, keep up with mortgage payments where applicable, and take out appropriate as well as sufficient property insurance, it is highly unlikely that a real estate investor would lose their entire capital. The same cannot be said for other asset classes.

3. Immediate and Regular Cash-flow & Maybe Even Profit. 
Unlike stocks and shares for example where an investor would have to wait for dividend distributions - assuming the company is doing well and opts to distribute dividends - with real estate he could and often will start earning cash flow immediately from rental income. 
If purchasing at auction or as a result of distressed sale or below market value, investors often have equity in the property from day #1 of acquisition. 

 4. Equity Capital Appreciation Over Time.  
Real estate investments can produce positive net cash flow each month if selectively bought and financially structured appropriately, they can also have the added bonus of equity build up over time,  whether be it form mortgage balance pay off from rental income or rising property prices, capital build up and preservation is inevitable. 

We aim to deliver much needed capital for SME’s and Property Developers.

 5. Leverage & Financing Options Available Reduce The Barriers To Entry. 

The many financing options available as well as taking advantage of them is one critical success factor for many real estate investors. 

  • Starting from as little as 20% deposit on a property and 80% finance on the purchase balance coupled with low-interest mortgage payments and even interest only payments.. 
  • No money down if sourcing and managing the property or having a joint venture partner funding the 20% deposit.
  • Alternatively other options such as rent-to-rent mean, whilst you do not own the property, you control and manage it,  therefore not even requiring a mortgage or the 20% deposit which could be a large lump-sum especially when just starting out. 

Should investors have adverse credit, which could make if difficult to get a mortgage, there are other specialist lenders and private bridging lenders that over-look this factor and could be a viable option. 

In contrast, if an investor wanted to buy £100,000 of shares, they would have to have this exact cash available vs real estate for a similar value property purchase where investor can have £20,000 cash and borrow the rest from the bank with all the other benefits inherent to this asset class. 
6 . Flexible Time Commitment and Scalability. 
Investors can commit full-time or part-time to suit. It is however advisable for investors to build a team around them as property investing like any business is a Team sport

7. Tax Advantages 
Subject to the right ownership entity structure and qualified professional chartered accountant advice, some common deductible expenses are: renovations, property management expenses, insurance premiums or property tax. 

A big plus is often, capital raising TAX Free. This means any equity pulled out of the property is Tax Free unlike other investment classes. Always seek professional advice, and a qualified account must always be on your Team as a real estate investor. 

By CEO, GIC Capital

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