Lots of people invest in real estate and lots of other people avoid investing in real estate without fully understanding its risk and return profiles. Based on work co-published by REALPAC and the Pension Real Estate Association (PREA) which was presented at a recent conference in Toronto, Greg MacKinnon noted how easily investing in commercial real estate companies can be compared with investing in stocks and bonds. Unpacking this work reveals informative details.
Lots of people invest in real estate, in the sense of owning (jointly with a bank) their home. This is risky. Rather than own one building used for residential purposes only, it would be better to own shares in many buildings: in other words, to buy REITs or pension funds which invest in office buildings or industrial properties or …. In addition to making the investment more liquid, it lets professional managers make the day to day decisions. Continue reading