What You Need to Know Before Investing in Real Estate

Jan 8, 2024 | Blogs/Articles

By John Rogers, President & COO

First, let’s clarify that we’re referring specifically to investing in real estate, and not personal-use properties like residences or vacation homes. 

When making real estate investments, there are several approaches to consider, including investments in public real estate, private real estate funds, and individual properties. 

Below we highlight the pros, cons, and examples for each approach.

Public REITS

One of the more common vehicles for investing in public real estate is a real estate investment trust (REIT). Basically, REITs are companies that own and control income-producing commercial real estate. 

  • Pros: Liquid, historically attractive returns, core properties across the U.S., diversified, professionally run. REITs can be accessed through ETFs, mutual funds, or by owning individual REIT securities.  
  • Cons: Volatile, interest rate sensitive, only $1 trillion of the $21 trillion of commercial real estate is publicly traded.
  • Example: Welltower Inc. owns a diversified healthcare portfolio of over 2,000 in-place properties spread across the senior housing, medical office, and skilled nursing/post-acute care sectors. The portfolio includes over 100 properties in both Canada and the United Kingdom as the company looks for additional investment opportunities in countries with mature healthcare systems similar to those in the United States. Investors of this stock gain exposure to these properties and their earnings.

Private Real Estate Funds

Unlike publicly traded REITs, investing in private real estate implies buying an ownership interest in specific properties, individually or with other investors. Here are the advantages and challenges of this approach:

  • Pros: Typically provide higher income than REITs and have the potential to have a higher return. Private real estate funds may have lower volatility due to the way private real estate is priced. Offers access to markets or niche opportunities potentially not seen in the public markets and often, there are professionally managed options. Private Real Estate Funds may be accessed through investment advisors, brokerage firms, or online platforms.
  • Cons: Limited liquidity, sparse transparency, requires more due diligence as there are so many different options, and you have no control over the strategy.
  • Example:  Private real estate investments include broadly diversified funds that have all types of real estate sectors (multi-family, office, industrial). Niche funds also invest in specific sectors and/or locations.  

Personal Real Estate

Investing in personal real estate (individual properties) means directly purchasing and managing property. This can either be done as an individual investor or alongside other investors.

  • Pros: You might have expertise in a specific market area, access to a special situation with a deeper discount, and you might be good at doing or managing the work needed on the property. Potentially, you could have a higher return, the ability to use more leverage, and more control of the investment.
  • Cons: Can be risky because you’re not as diversified as you are with a fund. Also, there are legal liabilities to be aware of and major costs to deal with, including maintenance and operations expenses.
  • Example: Three friends, Madison, Ty, and Ellen, form an LLC and invest in a 10-unit apartment building a mutual acquaintance told them about. The purchase price is $1,200,000, and they each contribute $80,000 for a 20% down payment. Madison is responsible for property management, and Ty and Ellen contribute their legal and financial expertise. After eight years of perseverance, they sell the property for $3.8 million.

Get Started!

There’s no one-size-fits-all approach to real estate investing. The key is to ask the right questions to determine which approach works best for your situation. At Veracity Capital, we take pride in asking the right questions so we know how to guide our clients toward real estate investments.

Start planning your financial future by calling us at (844) 508-7884 or emailing us at info@veracitycapital.com. You can also schedule a meeting online. We look forward to hearing from you soon!

About John

John Rogers is president and COO of Veracity Capital and has been in the financial planning and investment field for more than 20 years. He is responsible for developing, organizing, implementing, and evaluating the Veracity Capital’s fiscal function and performance and also ensures the company has all operational controls, reporting procedures, and talent in place to support its business. John is passionate about building teams that work with clients to achieve their financial goals through education and consistent and timely service. Prior to founding Veracity Capital, John was the Director of Private Wealth in the Southeast Region and a wealth advisor at AYCO. Before that, John was a vice president and financial advisor at AXA Equitable in New York. 

John attended State University of New York College at Plattsburgh and holds the Series 7, Series, 24, and Series 66 licenses. Outside of the office, John enjoys spending time with family, boating, and is an avid football and baseball fan. To learn more about John, connect with him on LinkedIn

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.