Why should I invest in real estate rather than stocks, bonds, gold, crypto-currency, or something else?

Other asset types have their benefits, and belong in a balanced portfolio. However, real estate offers distinct advantages for an investor looking to diversify or strengthen their holdings. An investment property stands apart in its ability to simultaneously deliver immediate passive income and significant appreciation over time. For example, even the highest-dividend stocks can’t match the cash-flow generated by a well-run apartment building. While stocks and crypto might experience more sudden jumps in value, they also carry more downside risk. Prices for investment properties are historically strong and less volatile than other asset types. Owning real estate also comes with major tax benefits that aren’t available elsewhere.

The advantages of investing in real estate are amplified by the availability of financing. Whereas an investor with $100,000 will typically purchase only $100,000 worth of stock, that same investor may take a loan and purchase a property worth $400,000. If the property appreciates by a mere 10%, the stock must go up by 40% just to keep pace. For more details on the financial power of real estate investing, check out our study comparing multi-family rental properties to the S&P 500.

Why should I pick Yorkshire Realty?

Most brokers concentrate on homes and condos for clients to live in. We are well-versed in that process, and welcome the opportunity to assist clients with it. However, multi-family rental properties are an entirely different animal, and are our specialty. Yorkshire Realty has a mix of credentials and first-hand experience that is unmatched in this area. CEO Chris Barker is an attorney who spent over a decade at the nation’s top law firms, and CFO Nida Rinthapol is a data scientist with a Ph.D. in quantitative research. Chris and Nida put their skills to use in building their own successful portfolio of properties, and now to assist clients. For instance, Chris’s experience representing investors in matters involving complex financial instruments has given him a deep understanding of the banking and mortgage industries. Chris oversees all legal matters for Yorkshire Realty, including forming investments, negotiating agreements, and resolving disputes with government agencies and tenants. Similarly, Nida’s research background is invaluable to our process of analyzing masses of market data to identify properties that make good investments. In our years as real estate investors and brokers, we have navigated every situation imaginable, and we bring that experience to bear for our clients.

What further differentiates Yorkshire Realty is the breadth and individualized nature of services we offer. While most brokers’ involvement starts and ends with a purchase or sale, we provide a full suite of services that cover every phase of the investment process and are tailored to each client’s needs, including property management and legal services. Last but not least, we give clients the opportunity to do something meaningful with their investment. Through our longstanding partnerships with organizations that fight homelessness, support veterans, assist single mothers, and support other worthy causes, we provide safe and decent housing to those who need it the most, while receiving significant landlord incentives and rental support in return.

Is Yorkshire Realty a real estate investment trust or a crowdfunding site?

No, we are a full service brokerage, management company, and law practice that helps clients acquire and operate specific income-producing properties. This is the most direct, tried-and-true method of real estate investing.

A real estate investment trust (REIT) is a company that owns a pool of income-producing properties and sells shares to investors. REITs are required to distribute most of their income to shareholders in the form of dividends. Many REITs are publicly traded stocks, which means they’re highly liquid and require no minimum investment. The trade-off is that most REITs don’t offer much in terms of appreciation, and the dividends are taxed as ordinary income.

Crowdfunding sites are a fairly new way to invest in real estate. They allow investors to purchase a small stake in a large project—often the development of an apartment complex or commercial building. Investors usually receive a percentage return over a five to ten year span, and a share of the profits when the project is complete. Crowdfunding can have greater returns than REITs, but come with more risk—if the project fails, the investor could lose all of their investment.

Our direct investment model has many advantages over both REITs and crowdfunding. By having far fewer moving pieces between the investor and the asset, we are able to deliver greater total returns. In addition, clients can have a real voice in the operations of the investment, if they choose to be more involved. Having a larger stake in the investment may also bring a greater pride of ownership, including through our partnerships with organizations that fight homelessness and support others in need. Finally, we offer a range of investment structures, such as group investments that reduce each client’s initial investment.

What kinds of properties do you invest in, and where are they located?

We focus on multi-family residential properties located in the greater Los Angeles area. Our founders are long-time residents of Southern California who know the region thoroughly. We have studied the market and identified areas that have a concentration of multi-family properties, and a price-to-rent ratio that allows for significant net rental income. We emphasize properties in central locations, close to major transportation hubs, universities, stadiums, and entertainment venues, because those have consistently high rental demand and serious upside for appreciation. Furthermore, we target two-to-four unit buildings because those qualify for residential (versus commercial) loans, which have better and more flexible terms. See our sample portfolio for examples of specific investments that we have overseen.

Do I have to be located in California to invest with you?

No. Although we are based near the investment properties, our clients do not have to be. We serve investors from all around the world. For investors located in another state, we assist with all necessary California tax and other filings. For investors located in another country, we work with lenders who specialize in financing for foreign nationals, and we help with any special issues that arise.

What is the minimum amount that I can invest?

That depends on current market conditions and how the investment is structured. As of 2021, the properties that we target usually go for $750,000 and up. An investor looking to buy all-cash should expect to bring the full purchase price plus 2% for closing costs.

Many investors will prefer to use financing, and properties in this price range typically qualify for residential loans that require a down payment of 25% or less. An investor looking to acquire full ownership with financing should expect to bring 27% of the purchase price, which equals a minimum investment of approximately $200,000.

The third option that we offer is to invest as part of a small group that Yorkshire Realty puts together, where multiple like-minded investors contribute to the down payment and receive a proportionate share of the property and its cash-flows.

When can I cash out my investment?

While we focus on properties that generate income immediately, our investments perform best when they are held long-term. As rents, prices, and principal balances all rise, but expenses stay mostly fixed, the annual returns will continually increase. We therefore advise clients to invest with a long-term outlook, like they would have with a retirement account.

That being said, we understand that clients may need to liquidate their investments at different times and for various reasons. If a client acquires full ownership of a property, they can of course sell the property without limitations. Although any real estate requires more effort to sell than an index fund or treasury bond, the properties that we target are fungible assets with an established market, and we will ensure a smooth transaction. If a client acquires partial ownership of a property, as part of a group, the relevant agreements will contain provisions with options for early liquidation that are fair and reasonable to all group members.

Is now an okay time to buy? Isn’t the housing market due for a downturn?

Our investment strategy does not depend on predicting the ups and downs of real estate prices. We focus instead on acquiring properties that deliver consistent rental income, regardless of price movements in the broader housing market. That’s why we invest in areas with strong rental demand and low vacancy rates, such as the central parts of Los Angeles. While prices for multi-family properties in these areas have risen over the last several years, so too have rents. Thus, we are continuing to see properties for sale that are capable of generating significant net income. These kinds of properties also tend to have the most stable prices. They are usually the first to rise and the last to fall, because they are fairly fungible assets that deliver consistent passive income, even in a market downturn.

Doesn’t real estate require a lot more work than other investments?

It’s true that investing in real estate is a more involved process than buying an index fund or Treasury bond. While off-the-shelf products like that need little attention, a real estate investment is more like a bespoke suit. To truly thrive, an investment property must be carefully selected, acquired on the right terms, and diligently managed. However, the investor does not have to do that work themself. At Yorkshire Realty, we take care of every part of the process, from structuring the investment, to acquiring the property, to overseeing daily operations, to the eventual sale of the asset. We offer clients an experience that is tailored to their preferences. The client can acquire full ownership of a property, or participate in a group purchase. Either way, they can be as hands-off as they are with stocks and bonds. Or the investor can be consulted on as many issues as they wish.