Dolores Pérez Islas
Business -Consulting -Investment
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Regardless of the COVID-19 contingency and particularly since the World Health Organization declared a widespread pandemic and the impact that this has had in all economies of the world. There is much discussion about the areas of opportunity in a crisis context, the ideal thing is to take conscious disitions to avoid being part of economic assets that are revalued at the basis of panic diections.
An investment portfolio must always contain financial and real estate assets, and the percentage will depend on the investor’s preference, risk profile, objectives, past experiences, and who advises it. But the idea is to break the myth that financial investments always generate better returns, and that real estate investments only achieve low, but safe returns.
While traditional real-estate investment leaves low returns, it is important to understand that there are sophisticated ways in which large investors achieve high returns, higher than those achieved with financial assets and with a much lower risk level. Here are some points to consider regarding the distribution of wealth in financial and real estate investments:
- In real estate investment you can buy under the market value especially at times of need of liquidity, a situation that could be present at the moment in the real estate market in Mexico, while in financial investment all investors pay stocks and bonds at the same value every day, in a much more speculative trend.
- Real estate investments tend to withstand the severe crises suffered by the markets while financial assets correct significantly.
- To be sure, financial assets are more liquid than real estate assets. But if you operate in international markets such as the US or France, you can access low-rate mortgage loans from 4% to 0%. In just 30 days, immediate liquidity is obtained with financing on portfolio assets, which is recommended for investors seeking to take profits from their credit accesses and inject their capital into markets or opportunity destinations like Mexico. Even though interest rates for leverage in Mexico are relatively high compared to other countries, despite the crisis banks will continue to leverage areas of opportunity, and housing represents one of the sectors with the greatest resistance in times of crisis.
- Investing in real estate assets in appropriate markets, for example, with the dollar rising, there are sector-by-destination opportunities in border cities, historical destinations, beach destinations, cluster areas, metropolis and emerging nodes with residential profiles are the best options for acquiring dollar-valued properties, especially in the recovery phases, where there is a lot of assets below the cost of market value. returns without leverage above 15% per annum and more than 30% per year can be achieved with moderate leverage of 60%, with low risk of capital loss.
- Generally when you invest in the financial sector and do not have exchange rate coverage, exposure to a strong change in financial assets is very high although this also implies that the benefit may be high. On the other hand, while real estate is also affected, they do not have the same correlation, so when buying a real estate in dollars in a medium- and long-term strategy. the transaction at a high exchange rate is related to the surplus value of the property that usually increases, as well as the commercialization in that same currency.
- When the financial market is in crisis, it generally affects all markets, investment activity is likely to decelerate during the first quarter of the year as investors adjust to uncertainty. In the real estate market the effect is generally located in sectors most affected such as retails, automotive, hotel, restaurants, co-work, co-lives are the most vulnerable. While the residential housing portfolio continues to show relative strength in the face of cross-cutting crises such as the current one.