Ch 18 Property

Question 1

What is property/real estate

Answer 1

Investments giving legal rights to land/buildings, purchased with intention to lease and collect income, also sold for capital gains/losses

Question 2

What is the nature of property

Answer 2

Real asset , good match for inflation linked liabilities. Able to increase rent with inflation therefore could be considered as an alternative for equities

Question 3

Why is property not marketable

Answer 3

Large unit sizes
Uniqueness
Valuation
No exchange where traded

Question 4

What is the yield disadvantages of property

Answer 4

Dividends are reviewed annually whereas property less often
Less marketable
Expenses are larger
Large units not very flexible

Question 5

What are the yield advantages of property

Answer 5

Tangible assets which is very secure
Less volatile than equities due to not being traded often and residual value
Desirable and diversified
Upkeep costs could be delegated to tenants
Owner can change nature of property