When people think about investing in real estate, the most common image is still buying a home to rent it out and benefiting from both rental income and possible appreciation. However, direct investment covers many more possibilities: commercial premises, hotel units, assets managed by specialised operators or properties acquired in the early stages of development.
The common feature is not the type of property, but ownership. In a direct real estate investment, the investor acquires full ownership of an asset and participates directly in its income, value evolution and risks.
This model usually requires more capital and concentrates exposure in a specific property. But being a direct owner does not necessarily mean searching for, buying, managing and selling the property without help. Urbanitae Direct Investments combines individual ownership with a professional process of selection, analysis and support throughout the entire investment cycle.
Direct investment and crowdfunding are not the same
In crowdfunding projects, several investors contribute capital to a structured transaction. Each one participates proportionally according to the amount invested, but does not individually acquire the full property.
In Direct Investments, by contrast:
- the investor buys the asset;
- the exposure depends directly on that property;
- the main decisions correspond to its owner;
- and financing, if used, forms part of their own transaction.
Crowdfunding makes it possible to distribute smaller amounts across several projects and facilitates diversification. Direct investment offers a more personalised experience and greater control over a specific asset, although it requires a larger outlay and concentrates risk to a greater extent.
Both formulas can complement each other. An investor can use crowdfunding to spread capital across different transactions while also holding one or more directly owned assets within a long-term wealth strategy.
Direct ownership does not mean managing everything alone
Traditional real estate purchase can require the investor to identify opportunities, compare prices, study financing, review legal documentation, coordinate refurbishment works, find tenants and subsequently take care of management and sale.
Urbanitae Direct Investments structures this process to reduce that operational burden. The investor remains the owner, but receives professional support in stages such as:
- identification and analysis of opportunities;
- economic and financial assessment;
- reservation and acquisition;
- coordination of refurbishment works or launch;
- monitoring of the asset or its operation;
- rental management, where applicable;
- and support during divestment.
Delegating the execution of these tasks does not mean giving up control. The investor retains ownership and the ability to make the relevant decisions, while specialists, corporate tenants or professional operators take care of much of the day-to-day activity.
Two main types of opportunities
The traditional division between new-build and second-hand property is insufficient to understand how an investment works. A new property may be bought to be sold after delivery or to be held and rented out. Similarly, an existing property may generate income from day one or require refurbishment to increase its value.
That is why it is more useful to distinguish opportunities according to how they generate returns.
Operating assets
These are properties that are already leased or whose activity depends on a third party responsible for their operation. They may include:
- commercial premises leased to companies;
- hotel units managed by operators;
- serviced apartments;
- flex living assets;
- and buildings or portfolios that already generate income.
The investor acquires the asset, but day-to-day operation falls to the tenant or a specialised manager. This can make the investment a largely passive experience from an operational perspective.
Nevertheless, a leased asset is not automatically a low-risk asset. The analysis should consider:
- the solvency of the tenant or operator;
- the duration and terms of the contract;
- rent indexation;
- the allocation of expenses;
- occupancy;
- location;
- and the possibilities of re-leasing or selling the property.
A fixed rent agreed with a corporate tenant does not present the same risk as variable income linked to the performance of a hotel. In both cases, the quality of the contract and of the counterparty is as important as the property itself.
Properties in early stages
The second group includes opportunities accessed at an early stage, mainly new-build units from Urbanitae’s portfolio.
In these transactions, value creation may depend on:
- gaining access before general marketing;
- buying at an attractive price;
- benefiting from the project’s evolution;
- and selling or operating the property once completed.
The investor should consider construction, timing, demand and exit-price risks. It is not simply a matter of buying and waiting for the market to rise, but of selecting a good location, a reasonable entry price and a clear strategy for the asset.
This line will continue to form part of Direct Investments, although with a more demanding selection of developments and locations. The service’s growth is increasingly oriented towards operating assets and non-residential formats managed by third parties.
An increasingly sophisticated investment
The shift towards retail premises, hotel units and other non-residential assets partly responds to market developments. Rising house prices have not always been accompanied by equivalent growth in rents, which can reduce the profitability of certain residential transactions.
Non-residential assets may offer other sources of return, but they also involve more specialised structures. Their analysis requires understanding commercial contracts, operators, operating models and financing conditions that differ from those usually found in residential property.
Moreover, they are not always more expensive in absolute terms. A hotel unit may have a price similar to that of a home, but require a larger equity contribution because bank financing usually covers a smaller proportion of the purchase.
For this reason, the new offering is mainly aimed at investors with greater financial capacity and wealth-management experience, although some opportunities may also fit intermediate profiles with sufficient savings to make a significant outlay.
The role of financing
The owner may finance part of the acquisition through a mortgage or another debt structure. This makes it possible to invest in a higher-value asset while contributing only part of the price with own funds.
Leverage can increase returns on invested capital when the transaction evolves favourably. However, it also increases risk: instalments must be paid even if rents decrease, there is a period without occupancy or the sale price is lower than expected.
Before financing a purchase, it is advisable to analyse:
- the interest rate;
- the instalments;
- the percentage contributed with own funds;
- the ability to cover the debt with income;
- and the effect of a fall in rents or value.
Financing should form part of the complete investment analysis, not be used solely as a way to increase potential return.
Risks of direct real estate investment
Full ownership offers greater decision-making capacity, but it also concentrates results. The main risks are:
- Concentration: a relevant part of the wealth depends on a single asset.
- Illiquidity: selling may require time and accepting a price lower than expected.
- Financing: debt amplifies both positive results and losses.
- Operator or tenant: their solvency and performance affect income.
- Execution: a refurbishment, development or repositioning may suffer delays and cost overruns.
- Market: rents, occupancy and the exit price may evolve worse than expected.
All costs must also be included: taxes, notary fees, financing, insurance, community fees, maintenance, management, periods without income and sale expenses.
The relevant return is not the gross rent or the difference between the purchase price and the sale price, but the net result after all these items.
Which investor profile it may fit
Direct Investments may be suitable for investors seeking to:
- acquire full ownership of an asset;
- participate directly in its income or appreciation;
- build long-term real estate wealth;
- personalise their strategy;
- and delegate much of the day-to-day operation.
In return, they must have sufficient capital, accept lower liquidity and understand that direct diversification is usually built progressively through the acquisition of several assets.
The decision does not depend only on the amount available. The time horizon, liquidity needs, previous real estate exposure and whether the main objective is to obtain recurring income or generate value through purchase and subsequent sale should also be assessed.
Direct ownership with professional management
There is no single correct way to invest in real estate. Funds, SOCIMIs, crowdfunding and direct purchase offer different combinations of ownership, control, liquidity and diversification.
Urbanitae Direct Investments occupies a specific position: the investor directly acquires the asset, while relying on a professional process to select, analyse, buy, operate and sell the property.
This support does not eliminate concentration, illiquidity or the risks of the property. It can, however, reduce operational complexity and help better ground decisions. The key is to choose an opportunity whose income model, timeframe, financing and risk level fit the investor’s overall wealth.
