The terms ‘property’ and ‘real estate’ are usually used together, something that is especially apparent when talking about investment opportunities. And while here in the UK the default phrase used is property, it is important to remember that is a subtle difference between both these terms. In fact, in the world of property investments these terms are often seen at two different corners of the investment landscape.
For example, property investment by groups such as corporate and institutional investors are at a different level as compared to everyday investments. This is due to the amount of money they have available to invest, what they intend to achieve from investments, and the assets they invest within the same class. Everyday we see new commercial projects being started, and new buildings being constructed. Most of these projects are property investment by corporate groups. From the shopping malls built in London to furnished flats for rent in Stoke on Trent, all are basically investment projects. But can you tell whether they fall into the category of property investment or real estate investment?
For many people these terms are interchangeable and any difference is usually only seen by specific groups in the investing landscape. However, it can be interesting to know what the difference between these two terms is.
Real Estate Investment
Generally, the term “real estate investment” is used to describe the investment opportunities embarked upon by corporate and institutional investors. The investments made by these groups often involve acquiring property portfolios or acquiring a small property developer and their portfolio as a part of the merger. Their investment projects are on the highest level of property investing.
Alongside real estate investment, another relatively more popular term is used i.e. Real Estate Investment Trusts or RIETs. On the highest level, Real Estate Investment Trust allows investors to indirectly access and own property assets as opposed to having to own property for investing. Moreover, RIETs generally have a diversified investment portfolio which helps to average out the lows and highs of investing in a single property. This is especially beneficial for the investors as it reduces the level of risk that comes with investing in property.
This term is usually used to describe the investment made by individuals and professional investors. Property investments made by these investors is mostly purchase of single units or properties for rental or similar purposes. They may also include acquisition of small portfolios of residential properties, such as 5 small houses to rent to young individuals or small families.
Moreover, individual investors have recently started exploring opportunities in the acquisition of shares in crowdfunded property assets which allows them to invest with other investors in property they may nor have had the chance to become involved in otherwise.
Key Differences between Real Estate and Property Investment
Generally, the difference between these two terms is the level of investment made and the size of portfolios or properties acquired. Here are some important differentiators as a result:
- Capital Investment: The money invested, particularly in independent deals, varies largely between property and real estate investment.
- Risk: The difference in this case is usually seen between smaller property portfolios and high-risk commercial properties.
- Return on Investment: This mainly varies depending on the opportunity rather than on the type of investment. However, larger ventures such as shopping centres are more likely to make a larger ROI than an investment that involves four rental houses. This can also vary greatly by the acquisition time and what was the market condition at the point.
- Type of Investor: This is the most notable difference between the two terms. Generally, your retail and individual investors would be investing into property investment deals whereas your institutional or corporate investors will be looking at real estate opportunities.
Investing into Real Estate or Property
The aim of this post was to provide you with the resources and information you need to expand your knowledge of both types of investment. Regardless of whether you are using the term property or real estate, investing into the opportunities that fall under this umbrella can be vast, diverse and full of potential.