9. How to invest in real estate
The title of this post is both challenging and self-evident. Challenging because investing in the real estate sector in the traditional way is not available to everyone. Evident because, for those who already know us, Urbanitae is one of the simplest and most profitable ways to invest in brick.
But real estate crowdfunding is just one possibility among many. In the blog we are going to talk about the different ways to make a property profitable. But before talking about how to invest in real estate, we will clarify what we are talking about when we say real estate. Not everything is new housing, although, as we know in Urbanitae, this is a very attractive investment. Started.
The first thing to be clear about is what it means to invest in real estate. We could say that it consists of the purchase, ownership, lease or sale of land or any structure built on it for the purpose of making money. The normal thing when we talk about real estate investment is that we refer to four categories or basic sectors: residential, commercial, industrial (and logistics) and land.
When we talk about residential we refer to all those properties intended to be used as homes. However, surely you have heard of terms like build to rent or coliving and do not know very well what they mean. In addition to the home that everyone knows, the name living is often used to encompass different types of assets that share purpose.
For example, the coliving segment is one of those that has generated the most noise in recent months within the residential. And it is not surprising, since it supposes, more than a new type of property, a new lifestyle. In general, coliving involves a space shared by several users – generally, workers over thirty – with common areas and community services included in the rental price.
The residential sector also includes student residences and even the segments of Healthcare and Senior Living. The latter two are closely related, since They focus on people over the age of 65 with different needs and degrees of autonomy. Hence, they include from nursing homes to use clinics, through coastal urbanizations where you can spend retirement quietly.
And I’m sure you’ve also heard of multifamily. This concept refers to residential rental. It usually encompasses mainly two types of real estate assets: the privated rented sector (PRS) and the build to rent (BTR), although not only. The PRS designates private housing for rent completed, while the BTR usually involves the construction of housing intended for rent and managed professionally and on a large scale.
If we define it as “all those properties not intended for use in housing”, it would be correct. Thus, the commercial sector could also cover logistics or social health. But, to understand each other, we will limit ourselves to what it usually indicates. We are talking about spaces such as shops, shopping centers, hotels and resorts, restaurants and offices. It is common to analyze hotels and offices separately, due to the volume of investment they represent and their economic connotations.
Shopping centers also tend to deserve special attention. Contrary to what one might think, e-commerce has not displaced interest in “street offering”. As Savills recalls, 18% of retail sales are made in shopping centres, 72% in street stores and the remaining 10% through e-commerce). And investment, after the blow of the pandemic, is accompanying that reality.
The pandemic boosted some trends that were already coming from afar. Among them, electronic commerce, spurred on by the necessarily scarce freedom of movement. Thus, the logistics sector is one of the best performers in recent times. Therefore, investment in logistics warehouses, last-mile centers (to cover the last journey to the final consumer) or logistics at height (which requires less land) continues to rise.
In fact, the first half of the year has registered a record in the hiring of logistics spaces, as we tell you in the blog.
Soil is one of the least known assets, or one on which we least tend to reflect. After all, it’s quite prosaic: we step on it every day. Within the real estate sector, it is one of the most interesting sectors because land is one of the few invariable inputs : it is a scarce commodity because it cannot be generated more than there is.
Of course, when talking about “scarcity of land”, what is meant is a lack of land for urban uses. This has to do with administrative agility when granting licences and the restrictions that can be established, for example, with environmental criteria.
Another curiosity of soil is that, in reality, it does not refer only to the earth. In fact, it also includes the space towards “the center of the earth” and the one above. That is why there are also so-called air rights, which protect the ability to “develop space on the ground without interference from others,” as Wikipedia points out.
In any case, investing in land is usually complicated and risky for a small saver. The most common is done through instruments such as exchange-traded funds (ETFs) or socimis, which we will talk about on another occasion.