Business and Personal Finance © 2007

Chapter 11: Real Estate and Other Investments

Chapter Summaries

• The owner of a direct investment in real estate directly holds the legal title to the residential or commercial property and is responsible for its maintenance and management. An indirect investment is similar to investing in mutual funds. A group of investors buys property, and legal title is held by a trustee. Real estate syndicates, limited partnerships, and real estate investment trusts (REITs) are examples of indirect investments.
• The advantages of investments (syndicates and REITs) in real estate are: use as a hedge against inflation, ease of entering the market, and limited liability. Lack of liquidity and diversification, risk of declining property values, fewer tax incentives, and potential management problems are disadvantages.
• Precious metals include gold, silver, platinum, palladium, and rhodium. Precious gems include diamonds, sapphires, rubies, and emeralds.
• Collectibles include rare coins, works of art, antiques, stamps, rare books, comic books, sports memorabilia, rugs, ceramics, and other items.
• The value of precious metals and gems can fluctuate greatly, making them a risky investment. It is also difficult to predict the value of collectibles.