The Correlation between Direct Real Estate Investment and Public Real Estate Funds

While there are many ways to invest in real estate, the two main methods are direct real estate investment and investing through public real estate funds, known as REITs (real estate investment trusts). Each approach has its own advantages and disadvantages and each is correlated with the market in significantly different ways, a fact that was clear to see during the first year of the COVID-19 pandemic.

1. Direct Real Estate Investment
2. Public Real Estate Funds (REITs)
3. The Impact of COVID-19
4. Summary
5. REALTY BUNDLES’ Investment Strategy

Direct Real Estate Investment

Direct real estate investment involves purchasing a physical asset, such as an apartment, office or commercial property.
Key advantages include:

• Relatively Stable Returns: Direct real estate investments offer consistent returns over time.
• Control Over the Asset: Investors have full control over the management of and decisions related to the property.
• Potential Earnings: Income can be generated through rent or property value appreciation.

However, there are challenges:

• High Initial Capital Requirement: Such investments require substantial upfront capital.
• Lack of Liquidity: Direct real estate assets cannot be quickly converted into cash.
• Maintenance and Management Costs: Investors must handle ongoing property management and upkeep, making it less suitable for those seeking high liquidity.

Public Real Estate Funds (REITs)

Public real estate funds are companies that raise funds to acquire and lease properties. Investors purchase shares in these companies and receive dividends from the rental income generated by the assets.

The advantages of REITs include:

• High Liquidity: Shares can be bought or sold at any time, offering greater financial flexibility.
• Access to a Variety of Assets: REITs connect investors to a diverse range of properties without requiring direct ownership.

The Impact of COVID-19

During the first year of the COVID-19 pandemic:
• Stock markets experienced sharp declines, which negatively affected public real estate funds.
• Physical real estate assets, on the other hand, retained their value as, unlike stocks, their illiquid nature prevented immediate depreciation.

Investors fleeing the stock market sought more stable alternatives. Over time, the assets held by REITs such as logistics centres, data centres and similar properties were less impacted by the crisis. These funds maintained their value and even outperformed the broader stock market, presenting a lucrative investment opportunity.

Summary

Direct real estate investment and public real estate funds are two distinct approaches to real estate investing with a key difference being how they are correlated with market movements. During the first year of the COVID-19 pandemic, while stocks and some public real estate funds experienced declines, physical real estate remained stable. This lack of correlation between downward trends in the market and the value of physical assets created excellent opportunities for investors who chose public real estate funds, especially those that held stable assets.

REALTY BUNDLES’ Investment Strategy

REALTY BUNDLES’ investment strategy involves a thorough examination of real estate markets in every country and region where the company operates. By evaluating numerous parameters, the company makes well-informed decisions to achieve high returns.

Part of REALTY BUNDLES’ strategy includes diversifying its investment portfolios and spreading investments across various sectors to reduce risk and enhance returns.