If you are thinking of investing in real estate, you need to understand the value of Transit Oriented Development (TOD) and how in the coming decades it could benefit your own portfolio.
Have you ever said to yourself or someone else: “I own a home. Isn’t that enough real estate exposure?”
Many investors own a home, which they believe provides adequate exposure to real estate. In reality, however, single-family home ownership is quite different from income-generating real estate investments.
First, people buy homes because they need shelter, and for personal reasons related to family, neighborhoods, schools, and even tax deductibility. A home does not generate income, but rather requires regular expenses such mortgage, real estate tax, and insurance payments, plus maintenance expenditures. By contrast, income-generating real estate generates continued rental income that exceeds expenses.
Second, securities issued by companies that own and operate commercial real estate (such as REIT) represent a diversified investment with exposure to a range of properties in different geographic locations. By comparison, a home’s investment risk is not diversified; rather, it is highly concentrated in a single location.
Real estate takes many shapes, including houses, hotels, resorts, apartment buildings, raw land, office buildings, industrial facilities, shopping centers, Transit Oriented Developments (TOD) and storage facilities.
Different types of real estate require the employment of different strategies. For example, some involve current income and leasing, whereas others are more speculative and focus on capital appreciation, as well as the potential use of leverage such as construction and development.
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