Investment Alternatives to Multi-Family Real-Estate

[Darr]

I agree but that's exactly the point of this thread. Income producing Real Estate has the best risk/return (aka Sharpe Ratio) value proposition out there. There's no question about that. Notwithstanding, there must be something else that's competitive otherwise Cap Rates must drop due to the lack of alternative products.

 

[bizaro86]

Real estate absolutely has the best Sharpe Ratio you can get. It's disadvantages are mainly liquidity and severability. (You can't necessarily sell it quickly, and it's typically hard to sell a percentage of a propery). If those disadvantages don't affect you (maybe you have other liquid investments) then it may not make sense to switch out of real estate.



If what you want is a CPI adjusted mortgage, why not try to sell your multifamily building and take back a CPI adjusted 1st mortgage. If your building was in Calgary I'd look at such a deal if the other terms/price were right, so I'm sure you could find someone elsewhere. (Especially if it's upgraded as you mention). That might be a two birds/one stone sort of situation.



Regards,



Michael

 

[Darr]

A vendor take back was exactly what I was thinking about and asking if it has been done and under what terms and conditions. Investable product was another.

I'm fishing the idea for comments and for other alternatives as well.

 

[bizaro86]

I've never heard of a VTB being done with a CPI adjustment, typically it's just a straight mortgage, either interest only or amortizing. Rates are whatever can be negotiated. Which is why I think a CPI adjusted mortgage could work. You'll likely have to educate your buyer on the possibility, and the advantages to them. (lower headline interest rate, and the CPI increase to the principal amount would be tax deductible interest)



You might also be able to find someone who would take a first mortgage at 1% plus a CPI adjustment every year.



For other alternatives, there are also land leases. Similar to Greg's MHPs, you just own the land and lease it to someone who owns a building on it. These are popular in England, and are very often set up so that the rental (typically for 100 years or more) rate goes up with their equivalent of the CPI. They also have funds that invest in these, which may be open to a foreign investor, I'm not sure. You'd then have currency risk, but you could always hedge that out if you preferred.



Regards,



Michael

 

[Darr]

You're coming-up with some great stuff here- Thanks



Speaking about currency risk: If Monti gets his way, lots of folks will have their Euro shorts squeezed. Merkel will have to change her number from 999 to something else. You know there`s something wrong with the system when people are buying bonds for gains and equities for yield.