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Burt Polson's Real Estate in the Napa Valley: Consider alternative real estate investments - part one
Real Estate in the Napa Valley

Burt Polson's Real Estate in the Napa Valley: Consider alternative real estate investments - part one

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Consider alternative real estate investments—part oneOur global health crises hit commercial property values in April and May. Still, property sales are down considerably from this time last year, and investors are not finding the deals.

Property owners maintain a wait-and-see attitude when it comes to selling their investment property even though they are underwater and not receiving rent payments.

Talk in commercial broker circles shows we may get sucker-punched coming August, though if you know what to look for, it may not be a surprise.

The end of July will bring about stimulus checks all but used up with little likelihood of a second round. The unemployment payments with the extra $600 will end as well as the moratorium on evictions. Then coming October, the six-month moratorium on mortgages and student loans will expire. The fourth quarter could be a disaster for our economy.

Until then, investors are looking for great deals on undervalued real estate to invest. Many are turning to alternative real estate investments, which may prove to be the right decision today.

REITs (Real Estate Investment Trusts)

Many investors, including the big investment firms, are turning to REITs, which are securities back by real estate. Purchasing REIT shares is similar to buying stock in a mutual fund—you own shares of stock and not real estate.

You will find REITs hold real estate in specific property types or mortgages. It is strictly a hands-off, indirect approach to owning investment real estate. Management teams of many REITs know what to look for as part of the dislocation of our market, with the result are experiencing good returns.

However, just like investing in the stock market, REIT share values can fluctuate with market conditions and adverse economic conditions. Unlike real estate in the private sector held directly or in a partnership is not as volatile. This form of investment is usually liquid and easily traded.

Real Estate CrowdfundingCrowdfunding comes in several forms: investing in a new product, raising money for a cause, and purchasing real estate. Crowdfunding pools together funds from many investors, usually via a website, email, or social media.

Real estate crowdfunding used to be only for accredited investors but now removed this restriction as to the result of an easing of legislation. It allows an investor at any level to invest small amounts.

A crowdfunding campaign is usually for a specific development project or property. Still, it could be for a fund that purchases multiple properties. There are several companies online who operate crowdfunding campaigns and can result in a worthwhile investment. You are placing your trust in the management team and their business model.

You do own shares of the project or fund. Unlike a REIT, it is not publicly traded, so you usually are in for a specified period. The share values do not fluctuate like stock or bonds and are not impacted as readily to market conditions. This is considered a long-term investment of a few years or longer.

Real estate syndications, private equity funds, and a few other types of direct investments will be highlighted in part two.

Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email burt@acresinfo.com and burt@stonemarkerinvestments.com.

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