REAL ESTATE – INVESTING GLOBALLY

Owning real estate property to build wealth and income is popular.  What you may want to avoid are the midnight calls for plumbing or electrical, messes between tenants, or taking someone to court.  So here we share how to own an excellent portfolio of properties while keeping things both simple and profitable.

FOUR OR FIVE TO REDUCE RISK.

What kinds of property would best combine to reduce your risks and build long term wealth?  Notice, this goes well beyond renting out a spare room or single property.  Here we're going to see the value and stability of owning different types of real estate in Canada and globally.

Pic - Commercial Real Estate

RESIDENTIAL & COMMERCIAL INCOME

1. MULTI-UNIT RESIDENTIAL DEVELOPMENTS.   Residential rentals, properly managed, should continue paying a reliable and rising income through the years ahead.  Fluctuations can occur with changing economy and job markets yet over time the value of a diversified portfolio will grow.

2. COMMERCIAL OFFICE.   Driving any urban highway these days we see vast developments competing for the skyline.  In our urban centres, banks and other office complexes are in constant competition for space, accessibility and energy efficiency.  Know what?  Someone has to own these lucrative properties.  Pension funds, syndicates, and why not YOU?

3. COMMERCIAL INDUSTRIAL.  If you never thought of this, imagine the land under an Amazon warehouse, or an industrial giant like Magna, or other manufacturing, distribution, and logistics businesses who don't want to tie up their cash flow in property management.  So who owns that?  Who receives the rent?  ... You can be part of this picture!

4. COMMERCIAL RETAIL.  You may realize the following names share something in common:  Birks and the Bay, McDonalds and Marshalls, Roots and Rona, Sobeys and Starbucks, WalMart and every mall that still attracts a walk-in clientele.  These retailers are paying rent.  To whom?  How about YOU?

Pic Medieval Bridge

Early Toll Bridge -- ask me the story...

5. INFRASTRUCTURE.   This hybrid attracts income from railroads, airports, deep water ports, pipelines and electrical grids, telecommunications and renewable energy, privately managed hospitals and prisons, also waste and water treatment.  Anything that moves people, products, and information, locally or globally, will fit here. And it pays!   (See more here.)

RISKS?   RETURNS?  

Consider three choices -- real estate funds -- that let you participate and profit from the types of property I've mentioned above.  To be fair let's make this a blind test:  no names attached.  Returns are "net" money in your pocket.

No tenants will disturb you.  No plumbers will bill you.  No tax bills to hassle you.  No mortgage payments come due.  No moving dates to track, or court appearances to keep.  No need to shift holidays for somebody's emergency.   We'll skip names so you can get a fair and unbiased look at some time-tested real estate funds our clients may own.

Fund A.   5-year net returns have ranged from 4% to over 10% per year.  Risk is usually near "8" or about half compared to stock markets.   The fund doesn’t own properties directly but invests in stock companies (available on stock exchanges world-wide) which themselves own or manage property assets and draw income from them.   In the global meltdown of 2007-2009 as stock markets fell 55% to 75% this fund dropped 35% and recovered at twice the speed of stock markets.

Fund B.    5-year net returns are similar to "A" with risk even lower near "7".  This fund includes all five types of real estate described above.  Like fund “A” it invests in stock companies which own/manage assets for income and capital growth.  In 2007-2009 this approach dropped 17% and recovered in 21 months.  (Markets recovered fully in 6 years.)

REWARDS OF OWNING LAND LIKE THIS

Fund C.  5-year net returns have ranged 2.5% to over 8%.  Risk is extremely low (at "2" or less, it is nearly free of any stock market risk).  This fund owns properties directly (not stocks).  In 2007-2009 it gave a smooth ride, temporarily down 10% and recovering fully in 18 months (4x faster than stock markets). 

TIME TO DISCUSS?

1. Do you feel real estate is a useful way to grow wealth, reduce future risks, preserve income for retirement ...and even help your family?

2. Do you prefer to “touch” the physical property representing your wealth or simply open the statement that says what you own and how it's growing? 

3. Canada is 3% of the world economy.  Ultimately it's much safer and also rewarding to include property interests from other centres of global growth.

4. Imagine you could buy only one thing:  GIC paying 2% for five years, a government bond paying 3% for thirty years, or a real estate fund averaging 6-8% helping sustain income for life.   How will you choose?

REAL ESTATE - PAYING INCOME FOR LIFE.

Real estate is never your only investment but it brings many benefits as 10-20% of a wider portfolio.  As we develop your planning, real estate as described above can powerfully build wealth and secure the life you choose.

Brian Weatherdon, MA. CFP. CLU. CPCA.  
627 Guelph Line, Burlington, Ontario. L7R 3M7.   
Ret.Coach SEALCertified Financial Planner.  Certified Retirement Coach.
brian@SovereignWealth.ca 
905-637-3500
 

3 comments

  1. The is a well written and compelling argument to adding global real estate as part of anyone’s portfolio of investments.
    I very much agree that we need to look for low risk but reasonable return opportunities and real estate looks like it is one of these.

  2. Dear FM, yes thank you for sharing your comment. Depending on the approach (and one’s experience) real estate may or may not seem “low risk”. Within the larger setting of investment mandates, real estate can definitely reduce risks in two ways. (1) Reduce volatility or losses. (2) Reduce possibility of outliving money invested at today’s deposit rates. To sustain reasonable returns over time and protect Income-for-Life, global real estate as we’ve discussed above can be a vital piece to help protect one’s overall plan and financial wellbeing.

  3. “Until now, most Canadians did not have (easy) access to commercial real estate – these investments were typically reserved for institutional and well-connected high-net-worth individuals. The capital requirements alone made it impossible for most individual investors to own this asset class. From a return perspective, commercial real estate does not generally move in line with residential real estate, and the risk/return profile can be more attractive if you partner (effectively). Many investors are looking to grow and/or develop their real estate exposure, and adding commercial real estate … is a promising strategy.”

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