Investment options are not exhausted in the stock market and fixed income. There are other types of assets that provide attractive returns and help diversify the risk of the portfolio. The real estate sector is one of the most common and popular alternative investments. There are different gateways, from the direct purchase of housing to investment in socimis or real estate crowdfunding platforms.
The purchase of housing is the main way of entering the world of brick. The destination of the acquired property can range from its use as a first home to use it as an additional source of income in the form of rental income. Miguel Ángel García, a real estate investor known as Amigo Inversor on his blog about investing in the stock market and real estate, assessed the outlook for the real estate market in 2022 in a recent interview for Finect.
“If one could postpone the purchase, I would say to wait. We have been rising for a few years and there will be a correction, if not this year, then the next,” says García.
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It is, on the other hand, a good time for the home buyer with investment purposes. “Now I see a good time to make cash,” says García, whose real estate investment philosophy dates back to 2007. This philosophy follows a clear process: “I have always placed money in financial products, especially the stock market, and I have waited for it to arrive the correction to take that product away from me, make it liquid and put it into real estate”.
The purchase of housing, both for use and enjoyment and for rent or sale years later, must be accompanied by good mortgage conditions. “It is important to know how much the bank is going to lend you, for example, with a quick exercise of a pre-approved mortgage from an online simulator. Beforehand you will have an approximate figure of how much the bank can give you,” says this investor, who is in favor of providing a entry that comfortably exceeds the minimum requested by the bank and in case the individual can afford it: “If the bank demands 20%, I would give 30%, as long as it fits with your personal finances and is a good mortgage with the bank.
The million dollar question: fixed or variable rate for the mortgage? The author of the blog Amigo Inversor has it clear, even more so with a minimum Euribor that has given rise to very low interest rates: “Fixed rate to avoid complications, especially the person who buys a private home. In the case of the buyer of housing to invest can be different. Life is long and in 30 years the market changes a lot”.
Socimis and real estate crowdfunding
Access to real estate is not limited to direct investment with real estate. There are other options, some of which you can consult in the .
Variable income, through listed real estate, is a well-established alternative. It involves investing in real estate companies that are listed on the stock exchange and whose evolution is linked in part to how the real estate sector evolves. This pathway can be explored in two ways.
The most direct is the purchase of shares of listed companies in the sector. A second, more indirect way is through REITs, called socimi in Spanish (Sociedad Anónima Cotizada de Inversión Inmobiliaria). Socimi are real estate companies that have to comply with specific characteristics by law. Spanish women must have a portfolio of urban properties and obtain their income from rentals.
This type of investment has the usual risks of equities but the advantage of accessing the brick with more liquidity than with the purchase of a property. Investment in REITs or socimi also gives the investor’s portfolio a long-term decorrelation. Or what is the same, a greater diversification of his investments.
The investor can directly buy shares of a socimi or do it indirectly through investment funds that bet on them. This is the case of or the , two funds that can be consulted in Finect. REITS are noted for their dividend yield, which is why they are popular with income-seeking investors.
An investment formula that is making its way is real estate crowdfunding
Finally, an investment formula that is making its way with more and more followers is real estate crowdfunding. Its essence is to make common cause with other investors to buy a property or finance a real estate development. Investors become co-owners of the property and will benefit from the proportional part that corresponds to them from the rental or sale of a property.
The investment is managed through a real estate crowdfunding platform in charge of locating investment opportunities, which it makes available to clients and in return receives a commission.
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