A necessary real estate asset for many. Is that what you have?

Investing in alternative investments is a "wide net" and, like all investments, some are riskier than others. In looking at alternative/accredited real estate investments, we've already covered the basics of DST and focused investments. Investing in real estate development funds can protect the portfolio from inflation and rising interest rates (current rate is 8.5%). Most of the DSTs and REITs offering exposure to the real estate market are already built, and for most people, that's what they need. However, adding a small amount of development to your real estate exposure can provide a more versatile investment portfolio.

Development investing is the purest form of opportunity-oriented real estate investing. Opportunity-oriented properties include properties with lower purchase costs but requiring significant work to achieve standards. This may also include remodeling if the purchased site has existing structures. The level of work required to complete the facility increases the potential for greater profitability. With annualized returns around 20%, the stock market and other more conservative investments often can't compete. Remember, the more work required, the more the returns become "potential" returns, as outlined in "What is an Opportunity Investing Strategy?". Typical development scenarios include greenfield construction, repurposing, massive redevelopment for a distressed asset, or demolition and greenfield construction. The more work that is put in, the more owners can ask for for selling or renting real estate where there are big risks and big profits.

If you are already or plan to be in the conservative real estate sector, remember that all investments need diversification, not just stocks and bonds. We need to consider how to protect ourselves from their potential risks. These variables can be used as factors or filters when considering adding real estate development to your portfolio, according to Real Projectives.

Volume:

The bigger they are, the harder they are to break down - this is the first variable. Simply put, smaller projects require less of everything, which makes them more reliable. This can also refer to the level of work required, not just the actual size of the project. The scope includes the size of the asset as well as the level of work required for completion.

Location:

The location of the development is key for two reasons: the ability to check progress and knowledge of the area.

Financing:

Reviewing the capital structure can help investors better understand the development. Investors setting up these funds can ask questions about how much to borrow, how much has been invested personally by the developer and how much they need to raise from other investors. The less help they need from outside parties, the less you usually need to worry about. Researching the history of the developer and contractor can also be helpful. A successful track record and history of cooperation may indicate that traveling with them can be profitable.

How this compares to stocks and bonds

Like stocks and bonds, these investments represent future businesses that will profit from future income streams and also pay dividends, or not, depending on the deal, but they usually do. Unlike traditional investments in corporations, growth investments can offer greater dividends along with greater capitalization. In the case of apartments, rents will be higher if the structure is more valuable. Debt and equity funds typically offer a choice between asset appreciation and a stream of income from dividends or coupons. When dividends in traditional investments exceed 5%, their capital often doesn't return well. In development, this trade-off decider is removed from the equation, your dividend may still be high, and the future sale of your shares will be different from your AT& shares; Pay attention when your dividend stocks aren't growing in value.

Summary

Luckily for us, there are accredited investments that review real estate development projects and raise capital from accredited investors to make them happen. So far, we've looked at several such projects, covering everything from apartment complexes being built from the ground up to a fund that turns failing properties into self-storage facilities. These projects are usually focused on a particular area or asset type, and the companies that create these investments usually have "feet on the street" and knowledge of the local region and opportunities.

There are many passive real estate investment options, and development funds are part of a well-balanced portfolio for most investors.

The securities are offered through Arkadios Capital. FINRA/SIPC Member. Advisory services are offered through Creative Capital Wealth Management Group. Creative Capital Wealth Management Group and Arkadios are not related by ownership.