The opportunity to invest in interesting real estate assets is changing quickly. Back in the 1970s, one was stuck investing in limited partnerships with questionable investment returns that collapsed after the tax rules changed. The 80s and 90s saw the introduction and flourishing of new real estate investment trusts (REITs) that made real estate investing better organized, with improved clarity on the financing side, and clearer tax benefits on profits and income paid out.
Real estate is not stopping there. Improvements in access to investment funds, private and listed property, agriculture, timberland, pipelines, and other interesting plays have brought this whole area to life. Rather than only considering stock market investing as the way to get rich or provide a steady stream of increasing dividends into your bank account every quarter, modern investments like crowdfunded real estate REITs are popping up to provide alternatives for smart investors who appreciate more options.
Let’s now delve into a few of these exciting developments a little bit more.
Like to Travel? Try an Airport or Two
The idea of investing in an airport may seem like an odd choice. However, barring any scare like an infectious disease, the steady daily traffic of passengers flying into and out of a strategically located airport delivers a delightful income stream that’s hard to beat. Airports quite often have been given a monopoly where another airport won’t be built in the city for several decades which protects the investment.
The income comes in two main streams. The first is from carrier contractual fees and landing charges. The second is from local hotel chains, shopping, and parking charges. As the commuter traffic increases, the revenue rises accordingly. Seasonal dips in traveler volumes (and income) are to be expected.
As governments are actively selling off ownership stakes in its airport assets (France is a recent case with the divestment of its 49.9% position in the Toulouse airport), interested investors are taking a closer look. From sovereign wealth funds to venture capital funds to the public listing of the airports on local stock market exchanges, this is one real estate asset with steady cash-flow written all over it.
Crowdfunding Real Estate? It’s Now Real
Crowdfunding didn’t even exist a few years ago, but now multiple startup funding sites have found great success with pairing individual (and qualified high-roller investors) with investment opportunities.
So, what is real estate crowdfunding? It just means raising large sums of money from multiple investors–all toward the goal of pooling it together into large real estate deals they may otherwise have been unable to invest in. Real estate crowdfunding sites involve low minimum investments while offering unparalleled investment flexibility and diversity. There are a lot of sites popping up these days, too.
The newer of these is stREITwise. Their business is offering an institutional-grade office building portfolio through a new private REIT that’s funded through crowdfunding. The idea is to remove outside consultants and joint venture partners to keep the costs of running this private REIT under 2% annually. Their first real estate investment trust is the stREIT Office, which already has the Panera Break HQ in their portfolio and is actively adding more acquisitions.
The target annual return through both income and capital appreciation is approximately 10% without the use of excessive leverage. Less leverage equals less risk with most investments, so it has a good sleep-at-night factor too.
The company plans to launch a series of REITs covering different types of assets. Initially offices, but quite possibly other traditional REIT sectors like industrial, shopping malls, and apartment buildings will follow soon.
Like Boating? Buy a Marina
For anyone who enjoys boating, they know it’s an expensive pastime. One reason for this is the fees that the marina charges to let the boat dock there or use their boat ramps. A good marina will include easy access to the local waterway, a boat launch, one or more boat ramps, walkways to reach the boat, and security to protect the boating assets from theft.
The main source of investment revenue is from the income the marina receives from one-day stays and longer-term mooring. The upkeep is not excessive either. These types of purchases are always going to be ill-liquid, taking time to acquire and more time to offload at a later date. However, for anyone who likes boating, it’s a natural fit.
When willing to look at interesting investment opportunities, the line between the traditional real estate and alternative assets like infrastructure (airports, toll roads), gas stations and the like, is quickly blurring. For investors who see the high price of the stock market today and worry where they can acquire useful investment assets at fair value with a livable flow of income every year to fund their retirement, the lines between asset classes don’t matter as much as they used to. What they care about is total expected return, the flow of income, and the risk inherent in the investment.
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