Resource Logo

Hello, you are using an old browser that's unsafe and no longer supported. Please consider updating your browser to a newer version, or downloading a modern browser.

Receive Updates
Resource Arrow Back to all
Date: September 24, 2018
Category: Real Estate

Examining Commercial Real Estate Equity and Debt Investments [Video]

Created with Sketch. Run Time: 2:02
Gene Nusinzon Portfolio Manager Resource Real Estate Diversified Income Fund
At Resource, we believe real estate investing is not an "either or." Leveraging both equity and debt investments may help you build a diversified real estate portfolio.
Share:

Bond yields are still historically low and the return of market volatility makes diversification even more important in mitigating risk. Investing in real estate may offer investors attractive income and diversification in a market where both are hard to find.

Beyond investments in real estate equity, investments in floating-rate real estate debt may offer a differentiated way to invest as we move later into the current cycle.

With real estate equity, you are a shareholder in a portfolio of properties, similar to a landlord without the management headaches. Your returns are based on rental income and changes in property values, which are historically tied to changes in interest rates. However, if a tenant defaults on a lease or property values decline, you will experience first loss in value. For the increased risk, real estate equity investments seek to generate outsized returns.

Floating-rate real estate debt investments are different. Think of yourself as the “bank” that provides loans and financing to property owners. You are paid income that adjusts in tandem with interest rates, which makes floating-rate mortgages especially attractive in a rising rate environment. Also, if a tenant defaults or property values decline, you are first in line for repayment, potentially preserving the value of your investment.

Like real estate equity, supply-and-demand dynamics dictate debt opportunities. Today, supply is low, as higher capital requirements have eliminated many commercial banks from the market. In fact, one-third of the top commercial real estate lenders from 2007 are no longer actively lending. Demand, however, is high, with more than $1 trillion in U.S. commercial real estate loans set to mature over the next three years. This set-up has opened the door for alternative lenders that are not constrained by tightened regulations.

At Resource, we believe real estate investing is not an “either or.” Leveraging both equity and debt investments may help you build a real estate portfolio that offers broad diversification, satisfies the returns you need, and generates attractive risk-adjusted income in today’s rising rate environment.

Dive deeper: Click the button below to download a related white paper.

Resource Securities LLC, Member FINRA/SIPC.
 
This information is educational in nature and does not constitute a financial promotion, investment advice, or an inducement or incitement to participate in any product, offering or investment. It is not intended to be used as a tool to determine your specific financial situation, tax status, investment objectives, investment experience, suitability for any specific investment, risk tolerance or investment profile. Resource is not adopting, making a recommendation for or endorsing any investment strategy or particular security.

Receive Updates

* These fields are required.

Emails and white papers can only be sent to financial advisors in Resource’s broker-dealer partnership network.

Resource is the marketing name for Resource Real Estate, LLC, Resource Alternative Advisor, LLC, and their affiliates. Resource may distribute certain products through Resource Securities LLC, a wholly owned broker/dealer, Member FINRA/SIPC

All statements and information other than statements of historical fact included on this website regarding strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. When used on this website, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. You should not place undue influence on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make on this website are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved because of the number of risks and uncertainties, many of which are beyond our control, including but not limited to uncertainties concerning the properties being operated and sold or refinanced, leverage and meeting debt service obligations, operating properties in different locations throughout the U.S., general, market or business conditions and changes in laws or regulations. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. To check the background of Resource Securities LLC or any registered individual, please go to FINRA’s BrokerCheck.