About Investing at IRESE
For Real Estate Investors, who are exposed to diversification risk and can benefit from price volatility of real estate assets,
IRESE provides a vehicle to buy and sell “real estate options“ in individual properties, investor benefit from:
- Appreciation in real estate value above expected
- Diversification based on asset and investor attributes
Learn more about Real Estate Options and how it works.
For Fixed Income Investors, who are seeking a guaranteed stream of payments secured by real estate asset,
IRESE provides an access to national real estate financing deal flow and allows for:
- Picking and choosing diversified real estate portfolio
- Exchange liquidity for active portfolio allocation and management
Learn more about Real Estate Notes and how it works.
Real estate values continuously change. The value is easily observable if the
same real estate property is bought and sold every day, similar to company
stock. That is not the case. To help us to gauge the property value, there are
number of index which has been developed, in order to track property value
change. We use those indexes to derive property value at any given time. Future
expectation for the level of the index creates volatility in trading financial
instruments derived from those indexes. For example, in case of San Diego, the
quarterly index changes and statistics are below.
Real Estate Market Analysis for your area.
Historic return on Real Estate in San Diego is 7.4% per year
Historic price change or volatility for Real Estate in San Diego is 5.5% per year
This example demonstrates an opportunity for investors to benefit from price changes. Investors are able to buy and sell real estate option contracts at will.
The expression “Don’t put all your eggs in one basket” has been a guiding principle for a long time.
Modern Portfolio Theory, which was popularized by Harry M. Markowitz in 1952 for which he won the Nobel Price in 1990,
combines investment diversification principles with quantifying risk and return.
From this theory, one can achieve a superior return and less risk by combining different assets.
The table below summarizes means, standard deviations and correlations for 3 major assets: S&P 500 index, Long-Term Government Bonds,
and Private Real Estate. Source: Ibboston Asscociates (Morningstar)
Diversification effect is greater when the assets are less correlated.
From the data above, one can create a combine portfolio of 50% bonds and 50% real estate assets and the new portfolio exhibits the same mean while decreases deviation by 44% as shown in the table below.
The above mentioned portfolio shows that diversification in real estate assets reduces financial risk, as measured by volatility in prices.
Specifically, the 6.6% volatility of the resulting portfolio is lower than the individual volatilities of the bonds and real estate assets,
while the return remains approximately the same at 9.8%.
Real Estate Market Diversification Analysis across many geographic areaa.
IRESE offers ongoing bilateral trading for real estate securities originated at the exchange.
Real Estate Option and Real Estate Note are designed to accommodates a need for one of the parties to liquidate their position at any given time:
- A property owner might sell the home and will need to terminate a contract to relieve any financial obligations; and
- An investor might want to reallocate the portfolio and wants to sell a current position.
Both Real Estate Options and Real Estate Notes are priced and traded on the IRESE exchange.
IRESE provides liquidity by offering market makers positions that create instant liquidity for any trade.
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