Commercial real estate investments come with various benefits unavailable in any other asset class, but liquidity is not one of them. That said, a few easy adjustments will help increase the liquidity of your CRE portfolio.
In this article, I will present a few ideas that work for many CRE investors. Your approach may include other options that fit better with your overall investment approach. Generally, CRE portfolio liquidity depends fully on your strategy and risk preference.
Public REITs
Public REITs trade freely on public stock exchanges. They are the most liquid of any real estate investment. However, they also act more like a stock than a real estate investment in many ways.
These investments allow you to diversify a portfolio to provide some CRE exposure. I like to use them to stay invested in my asset class of choice while searching for the next direct investment.
Many investors may use other public vehicles, like stocks, bonds, and cash to provide portfolio liquidity. However, I like the idea of aligning with best-in-class managers in a niche that I clearly see the macroeconomic value.
Net Lease Investments
Net lease real estate is the most liquid of CRE asset classes when it comes to direct investments. The market is robust and the assets trade more like paper than other real estate.
These properties still have many of the transaction requirements of other real estate, like title and financing concerns. However, they allow you to get a more favorable return with many of the tax benefits that investors enjoy.
Depending on your strategy, direct investing in net lease investments allows you to increase CRE portfolio liquidity for an intermediate period. It’s not a good as cash, but it has tremendous associated benefits.
World-Class Networking
An excellent network gives you the flexibility to communicate your buy and sell signals across the market quickly. This will not directly affect CRE portfolio liquidity, but it gives you the platform to be more efficient.
Think about the owners, brokers, and centers of influence in your network. They each have the ability to bring the right buyer into your world. This is a source for tremendous flexibility so long as you keep them warm and engaged