No Need to Trust Private Equity with Real Estate Investing:- A major advantage of real estate investing and the stock market is that the value of the asset is fairly well known due to the buying and selling that makes a market.investing in real estate  According to Joe Light in his Wall Street Journal article, "Can You Trust Private-Equity Returns?" that is not so in the world of alternative investments.

For private equity groups and other institutional investors, the value of the assets held in the portfolio are not known until the actual sale, as pointed out in Light's Wall Street Journal case.  That generally is not the case in real estate investing, as there is always the buying and selling of properties taking place.  For those invested in private equity and other groups like that, this can present nasty surprises when it is time to sell.  

That happened to many investors during The Great Recession.

When it was time to sell, it was discovered in an unpleasant manner than the asset was worth much less than expected.  That was devastating to investors.  It happened to the most experienced and highly compensated asset managers on Wall Street.  When something like that happens in an investment portfolio, the "ripple effect' can be tremendous.  Due to a shortfall in liquidity as a result of mispriced assets, others have to be sold to make up for the difference.  That never works out for the best for the investor.

This rarely happens in real estate investing, however.  What similar properties sold for, called "comps," are readily available from an agent or from any number of websites on the Internet.  This helps prevent terrible errors in asset management.  From that results much, much more effective risk management for investors, which provides protection for the asset base.

That is true for the vast array of real estate assets.  

There is generally a price known for foreclosures, turnkey properties, private mortgage notes, and small apartment buildings from the buying and selling of actual properties with as similar as characteristics as possible.  Good real estate agents and savvy sellers will price a property to sell in a reasonable amount of time.  It does no party to a real estate transaction any good to price real estate at a price so high no one wants to buy it.  High yield real estate investing needs a buyer, which will not happen if the property is priced too high!

When you go to sell real estate or any asset is not when you want to find out that its value is less than calculated.  That can scramble the plans for asset management.  Real estate investing, like all other types, is most profitable when there is a great deal of financial planning.  Passive investing for the long term with others in turnkey properties leaves that critical element to other more seasoned, experienced professionals.  As one example, Jerry Cohen, President and Founder of EquityBuild, has participated as a principal in more than 1000 real estate transactions, many of them turnkey properties, since 1984, which was detailed in another article on this site.