Assignment Title Basics Of Project Management Construction Essay

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Assignment Title Basics Of Project Management Construction Essay

Real estate can be subdivided into two distinct subclasses commercial real estate and residential real estate Investment in real estate is subdivided into two major classes ie direct real estate investment is achieved through purchase of property while indirect investment is normally achieved through acquisition of shares or units in listed or unlisted entities that hold property Shares and bonds are considered as the other assets in this task and these can refer to investment in all sectors of economic goods

Real estate tends to be held for long periods of time and is rather heterogeneous in nature which this brings a problem to valuate direct real estate investment So many times appraisal valuation of real estate is commonly relied upon other similar portfolios

Alternatively the market value of shares is constantly being updated Share returns tend to move together both over time and across markets and there is some evidence of increasing correlation during crisis periods

Real estate investment price is affected by the location of the site while the location of shares doesnt affect the price all around the world Taking for instances if shares in an American company go up this same increase will be reflected in whoever has invested in these shares from Malta In order to see the investment making profit in a real estate it takes time and many authorities control the investment which sometimes they can throw the project off course because of the time and cost consumption Additionally the client has more control over real estate rather than investing in stock market

Real estate gives more control to the client of what to buy where to buy and when to sell it The client can increase its value or the income it generates With real estate there will be no scandalous bookkeeping that causes the value of the investments to plummet With real estate no person will be telling the owner what the cash flow will be and no one will be taking the money and giving the owner whats left over

According to Heaney 2012 for real estate there is no total return index available for direct investment in residential real estate Share market returns are considerably more volatile than the returns for the direct real estate investments The direct real estate investment returns also exhibit less skewness and kurtosis During this literature it has been argued that combining direct investment in commercial or residential real estate with investment in shares could provide considerable diversification benefits

P 1b Give at least three reasons why a client makes an investment in real estate

During the past years the value of real estate has been constantly increasing making this a very interesting market for investors In the Old Testament Ecclesiastes Solomon had said Divide your investments among many places for you do not know what risks might lie ahead

Owning real estate brings along several advantages

Capital gains

Real estate tends to go up in value and the demand for property will never stop because as population increases more housing will be required The price of a property can be increased by making use of sweat equity where a small investmentimprovement to the property might reflect in a large increase in value

Cash Flow

Investment in real estate can lead to a generation of rental income and the rents tend to go up over time because of inflation which this is also a great interest for the owner This is done during the time that mortgage payments on the property remain stable Additionally real estate investment gives a growth component that cash lacks that is that the value of land will increase along time


Many say that leverage is what makes real estate the most powerful investment of all time This means that by using borrowed capital a person can acquire assets or fund operations Even though a person puts a small percentage of hisher own money into the property and the bank will put the rest the owner

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