The shock from the relentless slide in oil prices is spreading ever further into our economy and financial markets, with the dollar, the stock market and bond yields all descending to new lows…Public markets today are extremely interconnected and if China sneezes, rest of the world catches pneumonia!
Investments into commercial property through direct LP investments via crowdfunding portals can shield an investor from vagaries of capital market volatility. Here are top 5 reasons why:
1. Bricks and Mortar: Commercial property investments via crowd funding are secured by underlying real estate unlike most of the securities which have intangible assets underneath them. If you invest in a plaza, you can always go drive by and see how many cars are there in the parking lot on any given day!
2. Tenants: There are multiple tenants in multiple businesses that are providing cash flow to the property income statement and LP vehicle based on long term contractual obligations thereby providing stability of cash flow.
3. Easy: Commercial property is easy to understand for an average investor. Tenants pay predictable rents which form part of gross income and landlord pays predictable expenses resulting in a relatively stable bottom line net income that is then available for distribution.
4. Management: Crowd Funding portals promote transparency. An average investor takes comfort in the fact that the owner/sponsor of project will often times have more than 50% of the equity into the project aka: “Skin in the Game”. Prudent managers will then make sure that property is well managed
5. Scarcity: Economics 101 – invest where there is lesser supply and more demand. We have only so much well located land. Investments in such projects will hence always appreciate over time.