What is the ideal investment? How would this investment meet the expectations of a real estate investor looking for the ideal investment scenario? If an investor could wave a magic or rub a magical lamp; what attributes and characteristics would an investment have:
- A certainty of return of the principal amount with a nice return within an allotted amount of time.
- Hedge against long-term inflation would be a must, therefore capital appreciation potential with real tangible dollar growth.
- The ability to liquidate the investment quickly with ease, without excessive cost. Any asset becomes highly desirable if it has the ability to be converted to cash in the event of emergency or fire sale.
- It would have a very high rate of return
- It would be able to produce transactional receipts. There is nothing better than a paper trail to make an investor feel good about “return of” and “return on” investment(s).
- Manageability is very important to investors who are looking NOT to invest time and or energy.
- Availability to pledge collateral quickly and cheaply.
- Highly important is the taxation consideration on the investment. Investors seeking delayed or deferred taxes are certainly looking for these assets.
- The ability to leverage an investment effectively while requiring the least amount of equity and favourable debt terms.
- Last but certainly not the least is the pride of ownership.
These attributes are to be highly considered. Typically these are characteristics are present in these investments:
- High-grade multifamily or apartment property with an equity position
- Senior debt position on a multifamily or property.
- Land under multifamily, apartment and mixed-use property which is subordinated to the first mortgage.
- Ownership of Shares in top quality stock
- Ownership of a corporate bond
- A tax-free muni
- Raw land three to five years away from development
Attributes and Characteristics
If you could tally up all the future net tangible and intangible benefits flowing to these investments listed above, you would discover each investment has two or more of the “ideal investment” characteristics.
While we don’t exist in an ideal world and no such thing exist as an “ideal” investment, chasing this idea is not has hairbrained has it might sound. The use of the ideal investment produces answers to questions such as: What motivates different investors? How do the most important objectives of an investment? When does an investor’s goal dovetail into an investment opportunity? What are the miscellaneous objectives an investor would be willing to give up to pursue an investment opportunity to satisfy his or her primary goal?