Real Estate Investment Options (Part 1 of 3): Direct Ownership

​Real estate investment companies provide an excellent opportunity for non-real estate professionals to achieve cash flow, equity growth, and higher returns through real estate investments. However, no two investors are the same. Each has his/her own risk tolerance, financial goals, and time available to expend on the effort. Therefore, it is important that investors have different options to match their personal investment preferences.   

Mayfair Real Estate offers investors three investment options: direct ownership, private lending, and co-investments. In this three part series of blog posts, we’ll tell you a little bit about each of these options. Let's start with direct ownership of real estate.
 
In direct ownership investments, the investor maintains 100 percent ownership of the asset and assumes the risks and rewards of full ownership.

"In direct ownership investments, the investor maintains 100 percent ownership of the asset and assumes the risks and rewards of full ownership."

Some of the advantages of owning investment real estate include:

• Cash Flow: Investment properties provide regular recurring income in the form of rent.

• Attractive Yields: A well-managed real estate investment can deliver an internal rate of return (IRR) of 15-20 percent, and a cash-on-cash return of 8-12 percent.

• Real Assets: Real estate investments are real assets that benefit real people. There is a genuine need for housing. Housing cannot be outsourced or become obsolete through new technology. Unlike stock certificates, real estate has inherent value because it is made from land, brick, and mortar.

• Tax Shelter: Income produced by real estate is usually sheltered by depreciation, and therefore is taxed at a lower effective rate than your typical earned income.

• Inflation Hedge: Rent prices typically increase along with inflation. This means as inflation increases, so does the income from real estate investments.

• Ability to Buy below Market Value: This is a HUGE advantage of real estate ownership that is frequently overlooked. The real estate market is much less efficient than the stock market. Through hard work and knowledge, the savvy investor can find great deals and buy properties for less than they are worth.   

• Control: When you buy stocks, you’re putting your money in the hands of a company you don’t control. You’ve probably never met the people running the company, and when it comes down to it, you probably don’t have much more than a surface level understanding of the company’s financials. With real estate you have complete control. You can raise the rent, reduce inefficiencies in management to save money, and physically alter the property to improve its value. 

Direct ownership is without a doubt the best way to make money in real estate as an individual, but it is not without its challenges.

• First, direct ownership without the assistance of an experienced professional is far from a passive endeavor. Finding the most undervalued properties requires knowledge of the market and access to off-market deals. Understanding what can be done to improve the value of a property (and by extension being able to identify undervalued properties) requires experience. Implementing improvements – renovations, changes to management, and minimizing vacancy throughout – requires practice and the right team.

 

• Second, finding a good property manager for small multifamily properties can be difficult. Most property management companies specialize in either single family homes or larger apartment buildings and commercial property. Consequently, there is a lack of property management companies that specialize specifically in small apartment buildings (50 units and under).

 

• Third, with direct ownership, if your business plan doesn’t work out or you lose the property to a man-made or natural disaster, you’re on the hook for the loss. Of course, good insurance will cover you in many scenarios, but that can be very costly.

"Mayfair Real Estate’s direct ownership investment option enables investors to enjoy the rewards of real estate ownership while dramatically reducing the risk."

​For many non-real estate professionals, these challenges are enough to turn them off real estate investing altogether. Overcoming these challenges is where a competent real estate investment company can provide massive value to investors.
 
Mayfair Real Estate’s direct ownership investment option enables investors to enjoy the rewards of real estate ownership while dramatically reducing the risk.

Our Value in Direct Ownership Real Estate Investments
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• ​We specialize in finding under-performing (and often off-market) assets where we can add value through improved management, property renovations, and implementation of proven systems.

 

• We are one of the few companies in the South Florida market that focuses exclusively on small- and mid-size multifamily investments. We have the systems in place to manage these specific types of assets through the entire investment cycle: finding the properties, negotiating the purchase, re-positioning the properties for optimal returns, managing them for cash flow, and refinancing and/or selling the property at the appropriate time.

 

• As an added bonus, because we operate our own property management company, investors with just one or two properties can take advantage of the insurance discounts typically available only to investors with large portfolios.

 

• Most importantly, we do all of this while the investor maintains 100 percent ownership of the asset. 

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If you'd like to learn more about direct ownership real estate investments, we'd love to hear from you. Please feel free to contact us any time, and if we're not connected already, don't forget to find us on LinkedIn and Facebook!