Alternative Investment : Real Estate


Real estate is “property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this (also) an item of real property; (more generally) buildings or housing in general. – Wikipedia

Real Estate as alternative investment is not new. Humans. In fact from Roman age, real estate is way of Investment. It is one of the first asset which humans find out as good investment. Humans need House. But for everyone it is not possible. Price of Land, Cost of building and time it takes, knowledge make it difficult to build houses. So it was easy to rent or lease house. So it start as business for some peoples. If you have home and you don’t need part of it, then just earn from that. It is base of Real Estate. With time, it develop. If you have Capital then buy land and Build and Sell. If not then just acquired some and rent. With industrialisation, the form of the business slightly changed or get developed. Now there is one more property which we need and that is Offices. Plus now we need more space but Land is limited, so we start building New type of Building called SKYSCRAPER. There is one more thing which Real Estate will teach you is Leverage, but many peoples just forget this and start leveraging their Equity portfolio.

The reason why I am calling them as alternative investment and not Regular is There is different market available. Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. They are less liquid. But big plus point with them is that If bought once, its possible that The investment start yielding you. May be you don’t realize it but in many case real estate is like Equity. The value is increased with Evey fraction of second. You will not earn anything, until you sell it. But when it come to Source of investment, Equity and real estate is different. Source of Equity is most of the Time Exchange, but there is no Exchanges for real estate. Yes, Some apps are act like Exchanges but you cannot buy and sell house and pay money, at least upto now I don’t know. The return on the investment is also similar with Equity. Better the Property, higher the value.

One disadvantage with Real Estate is That the price is so big. Even if we called them as Hedgeing against Inflation, its impossible for small retail investor to buy them for his portfolio. In fact when you hedge portfolio with Real Estate you are not remain as Retail Investor. There are many things to write here about real estate investment but the big thing with which I am going to end is…. Our family teach us how to choose house but don’t teach how to find good company.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me or @androidashu & @InsideFinanc on twitter