property investment portfolio

An alternative to invest in a particular real estate object is the formation of a balanced portfolio of properties, which will be diversified by types of currency, by type of property, the types of income and on a number of other criteria. Among which:
• on the basis of the chosen strategies diversification
• taking into account the requirements of the investor, its capabilities and limitations
• using topical variants of investment property, the most popular among international investors
helps investors:
• the development of an investment strategy and develop a portfolio of investment real estate
• in case of necessity to manage the available portfolio of real estate
• implement the «exit strategy» from the particular investment, i.e. to implement the resale of the property, included in the portfolio
What is a «portfolio investment in real estate»
Property portfolio - this is a collection of objects of the real estate owned by one owner or group of owners.
Portfolio investments in real estate - is the complex of actions aimed at:
• formation of a portfolio of real estate
• management of a portfolio of real estate
• sale of real estate portfolio (i.e. the implementation of the strategy of an exit of the investment)
Who carries out the formation, management and sale of real estate portfolio:
• investor independently
• the investor with the help of consultant for investment in real estate
The main purpose of formation of the property portfolio - diversification risks

The investor has a choice:
• investor can spend the entire investment budget for the purchase of a real estate object or a «package» of similar objects of the real estate OR
• to form a balanced portfolio of real estate, by distributing the available investment budget between objects the different types and/or different locations, etc.
Formation of a portfolio of properties (in comparison with the purchase of one property (a «package» of similar objects) has:
• advantage: allowing investors to diversify their investments («don't put all your eggs in one basket»)
• disadvantage: the organizational more a complex of the actions (buy a «package» of the same objects in a single country - certainly easier than to invest in various objects in several countries)

What is a «Portfolio strategy of investing in real estate»
Portfolio strategy - formation of an optimal combination of assets (objects of the real estate), which would ensure the most effective ratio between the level of risk and level of income.
Thus, the direct action of the formation and management of a portfolio of real estate are carried out in the framework of the implementation of the portfolio strategy, developed and/or approved by the investor.
The basis of any portfolio strategy is the diversification, i.e. reduction of the level of risk without compromising profitability.
Ways of diversification in the formation of a portfolio of real estate abroad
№1. Diversification by currency asset

As in the period of stability of the world economy, and particularly in the period of global economic turmoil and increased volatility in currency markets, it is important to form a multi-currency portfolio of assets in property abroad:
• the U.S. dollar - real estate purchased in the United States
• EURO - objects of the real estate, acquired in the Euro area
• pound sterling - objects of the real estate, acquired in the UK

In some cases, investors consider for themselves and possibilities for additional currencies, such as:
• Swiss franc
• Israeli shekel
• other reserve currencies

№2. Diversification by type of real estate
Various types of real estate are (in each concrete moment of time) differences between themselves:
• on the level of rental yield
• the rate of growth of capitalization of
• on opportunities to attract financing for the purchase
• risk
• and a number of other parameters
That is why, in the formation of a diversified portfolio of real estate, the investor should consider a whole range of possible types and subtypes of real estate, from the point of view of the desirability of including them in its balanced portfolio of real estate abroad:
• commercial real estate (trade, office, warehouse)
• hotel real estate (hotels, mini-hotels)
• profitable houses and profitable apartment (the rooms of the hotel, serviced apartments, student apartment)
• medical properties (medical clinics, nursing homes)
• residential real estate (an apartment for rent, leaseback)
• other types of property (gas stations, designated car Parking lots, self-storage)

№3. Diversification according to the type of income of the investor
Fundamentally, an investor can receive two types of income from investment property:
• rental income
• income from resale of the object
It is important to be aware of the fundamental difference in the types of income from the lease and of value growth:
• rental income is the current, i.e. it turns out with the established periodicity (monthly or quarterly) during the entire period of ownership of the property
• and the income from the growth of the value of the investor will be able to get only at the moment of sale of the object, i.e. at the end of the ownership of the object of real estate
Ideally, therefore, the invest in the object, which will provide the investor not only current income, but also would help lock in the time of sale income from the growth of capitalization.
But not always the objects of real estate to the same extent attractive from the point of view of how the level of rental income, and from the point of view of the potential of growth of capitalization. Is typical situation, when the investment property:
• shows high indicators of the current yield with relatively modest potential of growth of capitalization
• and, on the contrary, have a high potential of growth of capitalization at a relatively modest level of rental yield
The two types of income are of different nature, one of the ways to diversify the portfolio of real estate abroad will be the formation of the portfolio by including into it:
• as of objects having a high current income
• so and objects, which have a high potential of growth of capitalization
How are chosen specific objects for inclusion in the portfolio of real estate
Concrete objects are selected in accordance with the criteria set:
• №1. Guaranteed income from the rental
• №2. The potential of growth of capitalization of the object
• №3. Attraction of Bank credit for the purchase of a real estate object
• №4. Positive cash flow
• №5. The low level of risks
• №6. Absence of the necessity for the personal participation in the management of the site
• №7. High liquidity + «Clear» exit strategy from investments
Topical directions of investment,
used in the calculation of the portfolios of real estate:
hotel rooms and blocks of numbers in the UK and France (up to 20% per annum)
student apartments in the UK (up to 19% per annum)
REIT - real estate funds in Germany (up to 17% per annum)
income apartments in Florida (up to 16% per annum)
retail real estate in Germany (up to 15% per annum)
retail real estate in the USA (up to 15% per annum)
hotels with a guaranteed income in Austria, Germany, England, Czech Republic (up to 14% per annum)
profitable home in Germany (up to 14% per annum)
student apartments in Germany (up to 14% per annum)
retail real estate in Switzerland (up to 11% per annum)
retail real estate in England (up to 10% per annum)
With any investment budget, already there is sense to think about the formation of a diversified real estate portfolio
«Very minimal» investment budget, where an investor can do the minimum diversification: from 100.000 Euro
Minimum investment budget, where an investor can already begin to form a multi-balanced portfolio real estate: from 500.000 EUR
How can diversify their investments, the investor has a much more modest investment budget
And for those investors, who have much more modest investment budgets (several tens of thousands of Euro), there is a possibility to diversification. But the opportunity for diversification does not lie in the sphere of direct investment, and in the area of indirect investment in real estate.
Indirect investment - it is an investment not directly in real estate, and investment in real estate funds, which, in turn, invest not in separate items of property, and in the entire real estate portfolios
Thus, if an investor, with a modest investment budget, plans to diversify its investments, it is advisable to purchase shares in investment funds real estate (REIT).