How to invest in real estate? Five tips to keep in mind

News & Insights - March 15, 2022

Real estate encompasses the activities related to purchasing and selling real estate assets of different types (residential, industrial, and commercial). Investing in real estate is a widespread option; various programs optimize this process, allowing for widening and simplifying the distribution of the strategies of managers or advisors.

How to invest in real estate? The most traditional way is through the direct purchase of real estate assets for their subsequent sale in a favorable economic context or to obtain rental income.

Another option is to invest in the stock market through the shares or bonds of listed real estate companies, which in Spain, for example, are known as SOCIMIs. These are companies listed on the stock market whose main activity is acquiring, developing, and refurbish urban assets for leasing. Either directly or through participation in the capital of other SOCIMIs. In the United States and the Anglo-Saxon world, they are called REITs, and in Mexico, they are called Real Estate Investment Trusts (FIBRAs).

REITs have a significant advantage over traditional investment in a fundamental matter: the minimum subscription required is lower to invest in this type of opportunity. In addition, they provide geographic diversification to the portfolio as they tend to specialize in real estate in one or more cities. They operate in different countries, economic regions, and real estate assets with a heterogeneous market context.

Investment funds specializing in real estate provide greater portfolio diversification, as they allow access to a wide range of REITs around the world. Indirect real estate funds are vehicles that will enable investing in companies that develop their activity in this market without acquiring properties or real estate.

The way of accessing real estate investment is crucial because it determines the ownership of the asset and its diversification or concentration. According to specialized sources, they recommend five keys to invest in real estate:

  • Analyze the risk profile of the investment in relation to our wealth.
  • Choose between diversification or concentration.
  • Professional appraisal of real estate assets.
  • Estimation of future profitability through rental or sale.
  • Find the most suitable trusted agents to carry out the investment, whether REITs, financial institutions, advisors, developers, fund managers, along with others.

Trusting advisors is vital for investing in real estate assets through direct purchase or REITs, FIBRAs, and funds. FlexFunds has various solutions that simplify investing in real estate and distribute these investments in different international private banking platforms (bankability), facilitating capital raising. CIX Capital, Black Salmon, Participant Capital, and Leste are leading companies in real estate and private equity funds that have raised close to US$ 200 million through FlexFunds’ ETPs.

FlexFunds’ Flex Private Program

A Flex Private Program allows real estate managers and funds to broaden and simplify the distribution of their strategies, giving access to international investors in an efficient and scalable manner through structured notes. Structured notes are instruments issued by an intermediary as an alternative to investment vehicles. It may be possible to obtain higher returns than with traditional investment methods, with a capital guarantee or a percentage invested at maturity.

Among the main advantages offered by the Flex Private Program are:

  • Create your own Irish special purpose vehicle (SPV) for exclusive use in your real estate projects.
  • Offering equity (shares) and debt (bonds) based investment vehicles for your projects through a Euroclear listed security.
  • Improve the distribution of your real estate fund.
  • Distribution and publication of prices through Bloomberg and other leading price disseminators worldwide such as Reuters and Six Financial.
  • Bankability: access to global private banking, financial advisors, broker-dealers through their investment platforms, and custodians.

If your company has a fund or real estate project of over US$ 20 million, FlexFunds’ solutions can be handy for you. Internationally renowned Services Providers support the Flex Private Program, allowing to implement your Euroclearable and listed product efficiently and without managing providers independently.

The Flex Private Program will allow you to broaden and simplify the distribution of your real estate projects in the global capital markets.