When most people think of real estate investing, what often comes to mind is owning a home. This property may increase in value over time or earn passive income as a rental unit, whether a person decides to rent out a room, a floor or the entire house to short-term or long-term tenants.
However, not many people consider opportunities in institutional grade commercial real estate, with high costs and a lengthy process making it more or less inaccessible. addy seeks to break down these barriers to create newfound opportunities for real estate investments. Let’s take a look at how it works and what benefits lie within.
What is institutional grade commercial real estate?
Institutional grade commercial real estate refers to a sizable property large in scale, typically one with at least four doors and that has an asset value of at least $3 million. Types of properties include apartment complexes, office parks and mixed-use buildings with retail space. In some cases, these properties may be valued significantly higher, with some costing as much as $75 million or more.
This sizable sum puts it well out of reach of the average investor. What’s more, with Millennials and Gen Zers looking to buy their first home and finding substantial barriers there as well, investing in commercial real estate is not on their radar.
How addy works
addy breaks down the barriers to commercial real estate (CRE) through online crowdfunding. The addy team of experts seeks out institutional grade commercial real estate opportunities; as a limited investor, addy breaks down the sizable investment sum into more manageable $1 increments. If a member wants to invest, their stake can be as little as $1 or as much as $1,500.
Traditionally, investing in CRE was done by those with deep pockets and plenty of experience in real estate. addy believes in real estate for all, opening up opportunities that have traditionally been granted to only the uber-wealthy. The minimum and maximum limits are put in place to keep it open for as many interested people as possible.
addy is approaching two dozen investment opportunities in its history, with a diverse portfolio across the country in British Columbia, Ontario, Alberta and most recently Quebec. This includes a campus style office park in Calgary, a large residential complex in northern Toronto, a Starbucks in Chilliwack and a boutique hotel in Montreal.
Commercial real estate vs. residential real estate
It’s important to note the difference between CRE and residential real estate investments. CRE does not include single-family homes and individual condos, which falls under residential real estate.
By avoiding investments in residential real estate, addy is not competing with the average home buyer across Canada. High demand and low supply are helping to increase housing prices across the country, making it hard for first-time buyers to get access. In particular, younger generations seeking to own property are being shut out by high down payments and heavy competition.
By focusing on institutional grade commercial real estate, addy is opening up new opportunities to the average investors without closing the door on the existing opportunities in residential real estate. Unfortunately, there are other crowdfunding real estate companies that do invest in detached homes, semi-detached homes and condos, worsening an already difficult situation for individuals, couples and families to buy their own home.
Commercial real estate investments allow portfolio diversification. The right investment can make for welcome passive income for those looking to make their money work for them. In order to join addy, you just need to be of age in your province – you can become a Charter member for $25 per year.
Like any investment, there are risks involved. It’s important to set financial goals and accurately assess your risk appetite. addy does not offer real estate advice, so you may want to consult a professional before investing.
addy does, however, provide an offering memorandum on each property and presents a property plan and potential time table for a return. The pros and cons of each investment are laid out, and addy identifies the type of property based on the risk involved.
As a limited partner, investors can only lose as much as they invest. They are not responsible for any property management or further work once an investment is made. It’s important to note that investments are illiquid, which means once that money goes in, investors can’t opt to take it out until the process reaches a conclusion.
All of this is designed to make investing accessible, transparent, and hopefully fruitful.