Property as an Asset Class

Flashcards on Property as an Asset Class

Asset Class

A group of investment options that share similar characteristics.

Growth Assets

Investments intended to grow or expand your investment, typically classified as high-risk, high-reward.

Defensive Assets

Investments that tend to be low-risk and low-return, producing lower investment returns over extended time frames.

Equities (or Shares)

A company’s listed units on the stock exchange.

Bond

A loan issued when a government, company, or other entity borrows money, obligating them to pay back the initial loan plus interest.

Private Equity

Investing in a company’s shares that are not listed on the stock exchange.

Return Potential

Stable investments can ensure positive financial returns in the long-term, due to capital growth and income over time.

Diversification

Property values are not impacted by certain external factors in the same way as other asset classes, and diversifying your investment portfolio gives you a greater probability of experiencing stable, positive returns.

Income and Wealth

Sound investments can provide investors with a secure, reliable, and regular income stream in the short to medium term.

Tax Shielding

There are certain tax-shielding benefits associated with property ownership and investment.

Liquid Capital

Any asset that can easily be converted, as opposed to a long-term asset, such as property, which cannot be easily convertedAn example of liquid capital is cash.

Investment Characteristics

These characteristics include the ability of a property to generate cash flow, how much the property acts as a hedge against inflation, the amount of operating risk and the property’s liquidity.

Financing Potential

This refers to how the property will be financed, and which entities will be able to provide financing.

Finance Risk

A property’s potential as collateral for finance, and its ability to generate cash flow to service finance.

Ownership Characteristics

These characteristics look at how the ownership is classified, how big the property is, the time and expertise required to manage the property, as well as economies of scale.

Economic & Environmental Characteristics

Economic characteristics refer to the ideal consumer, the property’s duration of use, government controls and any influences on supply and demand.

Function

What a property can be used for.

Ownership

The nature of the property’s owners, the amount of equity they commit.

Usage

How (the way) a property can be used.

Tenure

The conditions that determine how the land or building is occupied.

Supply and Demand

This refers to whether capital and business resources are available, as well as the economic climate and business cycle.

Governmental Control

This looks at control of land use, traffic, building, marketing practices, property taxes, and the environmental impact.

Location

The overall attraction of the surrounding area of the property and its proximity to services and amenities.

Flexible space

The dynamic in which people work has been evolving, resulting in a surge in remote working and the growth of coworking spaces.

Proptech

Property technology referring to the innovative intersection of the property and technology sector, improving customer experience and enhanced property management.

Tokenisation

A digital representation of a real estate asset on the blockchain, which can broaden access to investments and improving security through the blockchain.

Virtual real estate

Spending real money to acquire virtual property in these online environments

E-commerce impact and trends

The growth in online shopping have a significant impact on the property sector, particularly as they relate to trends in warehousing, distribution and logistics centres.

Commercial Property

Property used for trading purposes, or for conducting retail, wholesale, or service business.

Residential Property

Property that is only used as a dwelling but can still generate income for an owner or investor

Vacant commercial land

Land that has been zoned for commercial use or development

Commercial buildings

Improvements to commercial land (offices and hotels, for example)

Retail Property

Any property that is used for retail purposes – the selling of goods or services.

Turnover Rent

The percentage of a business’s gross revenue which is given to the landlord or investor.

Industrial Property

Property that may be used for the purposes of warehousing, logistics, or manufacturing

Industrial Parks

Groups of industrial plots that are enclosed within a secure area

Net Leases

Requires the tenant to cover costs usually attributed to the owner.

Office Property

Any commercial property that is used specifically for business purposes.

Vacant Residential Land

Land that is zoned for residential development and use.

Informal Settlements

Temporary dwellings that have been built from makeshift building material.

Dwellings

Permanent buildings that stand alone on a singular, identifiable piece of land.

Cluster Homes

A form of high-density group housing where every house is built on its own subdivision of a piece of land and each house and the land it is on are both owned by one person.

Sectional Title

A high-density housing complex that is divided into various units where owners have exclusive or common rights.

Share Blocks

Property complexes that a company owns or leases, and shares sold give the owner the right to occupy a unit but not ownership.

Time Share

When a property is occupied by several people at different brief periods of time

Fractional Ownership

Multiple investors pool their resources to collectively purchase and own a property, with each holding a fractional share.