Thursday, 5 June 2014

Types of Property Investment

I broadly categorize property investments into 2 categories, Direct and Indirect.

Direct Property Investment

Direct property investments are typically when an investor purchases and owns a property directly. Investors have direct control and influence over how the properties should be managed.

Typically, these direct property investments can be classified into Residential, Commercial, Offices and Industrial sectors. There are also other less common sectors such as hotels, hospitals, land banking, mines, plantations and car parks!

Indirect Property Investment

Indirect property investments are when we invest in vehicles or instruments where the underlying assets or business involves real estate. REITs, listed property developers, bonds issued by property companies are all examples of indirect property investment. Investors have little or no influence over the management.

Both direct and indirect property investments have varied benefits and risk. Most notably, direct investments typically are illiquid and require high capital outlay and high transaction cost (stamp duties, property taxes, legal fees…etc). Indirect investments tend to be professionally managed and the investor need not spend much time and effort to oversee the investment.

In this blog, I want to share my investment experiences in both direct and indirect property investments. So stay tuned for more!

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