Our ancestors’ transition from groups of hunter-gatherers to an agrarian society marked the beginning of home ownership.
The industrial revolution sparked demand for factories and mills and the subsequent expansion of towns and cities required the provision of shopping and leisure facilities.
The growth of the railways and steam ships reduced the cost of travel, encouraging tourism and hotel development.
These events are responsible for the creation of today’s real estate industry.
Real estate investment tends to be more stable than equities and rental yield offers stable long term income, with the possibility of capital growth.
Investment in property can be done directly by acquiring real property assets. The benefits are real exposure to the property market; you pay no fund management charges and retain full control over the asset – provided you have not borrowed to purchase.
The disadvantages are concentration in a single asset reduces diversification; there is a high minimum investment; property is very illiquid and the investor must manage the asset and pay all costs.
You could invest in real estate funds with exposure to a diversified portfolio of properties. This approach provides more liquidity than direct property investment; there is a lower initial investment and the fund manages the assets.
The downsides are, you pay management fees; have no control over asset acquisition or disposal and liquidity may be suspended if markets are in distress.
Real estate debt funds provide liquidity; lower minimum investment and the funds manage the assets.
Management fees must be paid; debt funds tend to be correlated to fixed income returns not property; there may be no inflation protection and you do not control which asset is bought and sold.
Investing in REITs or Listed real estate companies will provide liquidity, low initial investment and the management company manages the asset.
The risks are, little correlation to real estate returns and more exposure to the vagaries of equity markets – so the value of the investment can rise and fall sharply; it is difficult to get exposure to different property asset classes; management fees apply.