The Problem of Diversification in the Real Estate Sector
Owning residential buildings for rental remains the most popular option for most people looking to invest in real estate, after all, food, clothing, and shelter are the basic necessities of life. Also, owning what could be turned into a second home with minimal effort or sold when the equity of the house appreciates sounds like the best of both worlds.
Not really.
When it comes to real estate investment options, rentals pales in comparison to the exciting prospects in Commercial Real Estates (CRE) for investors looking to diversify and balance their portfolio.
CRE offers individuals a direct path to passive Investment and high-income potentials across several industries with lower risk. Passive investment gives contributors a hands-off approach to investment, enabling them to literally “invest and forget about it” — no need for making daily decisions about the investment itself. This option is most appealing especially to less savvy investors, who are not required to be knowledgeable about the asset class they are investing from fund managers. Contrary to popular assumption, rentals are fraught with occupancy risk, more difficult to manage, and higher capital cost per occupant. Owning a single rental means the investor is betting all or nothing on the market while fending management costs and an unsustainable cash flow. But what if you can diversify your risks across a slew of industries and sectors, asset types, geographical locations, and business plans? This is the unique opportunity presented by Commercial Real Estate.
Unlike residential, commercial real estate is based on acquiring properties for businesses to operate out of. Businesses pay a lease to use the property for production, storage, or office space, providing investors with steady cash flow and higher income compared to residential buildings. CRE averages an ROI of 6–12%, a vast improvement over the 1–4% residential often return on investment.
CRE investments are not only about profit creation. Investments in the sector also generate community growth by creating spaces for business ventures to move in or expand into. However, tapping into this potentials can be quite challenging for the average investor. CRE investment requires fronting up more capital compared to residential rental, inadvertently slamming the door on the foot of many interested individuals. Pooling resources together is often the best solution for the average investor, but questions of transparency, credibility, security, and accessibility have made this option a very dicey and often restrictive endeavour. Elements Estates is unlocking this market opportunity for everybody.
Elements Estates opens CRE opportunities for its contributors, regardless of class on the most transparent and most secure platform. The platform will expose contributors to a unique portfolio of real estate opportunities curated on the blockchain and governed by smart contracts. The blockchain enables anybody from anywhere in the world to immediately exchange financial values without requiring third-parties to establish and mediate trust. Using its native currency, ELES token, contributors can vote from a unique boutique of distressed assets and select which should be acquired, renovated, managed, and sold. These tokens can also be used to rent, lease, or buy properties from the network portfolio. By combining the high profitability and safety margins of CRE with the blockchain and unlocking the immense ROI potentials of distressed assets through an illustrious team that has mediated in many real estate deals in the EU, Elements Estates is redefining real estate opportunities.
