Tangible
Real estate is, well, real! You can visit your investment, speak with your tenants, and show it off to your family and friends. You can see it and touch it. A result of this attribute is that you have a certain degree of physical control over the investment - if something is wrong with it, you can try fixing it. You can't do that with a stock or bond.
No fixed maturity
Unlike a bond which has a fixed maturity date, an equity real estate investment does not normally mature. For instance, in Europe, it is not uncommon for investors to hold property for over 100 years. This attribute of real estate allows an owner to buy a property, execute a business plan, then dispose of the property whenever appropriate. An exception to this characteristic is an investment in fixed-term debt; by definition a mortgage would have a fixed maturity.
Inefficient Markets
An inefficient market is not necessarily a bad thing. It just means that information asymmetry exists among participants in the market, allowing greater profits to be made by those with special information, expertise or resources. In the real estate markets, information is king, and can allow an investor to see profit opportunities that might otherwise not have presented themselves.
Requires Management
Because real estate is tangible, it needs to be managed in a hands-on manner. Tenant complaints must be addressed. Landscaping must be handled. And, when the building starts to age, it needs to be renovated.
Lower Liquidity
With the exception of real estate securities, no public exchange exists for the trading of real estate. This makes real estate more difficult to sell because deals must be privately brokered. There can be a substantial lag between the time you decide to sell a property and when it actually is sold - usually a couple months at least.
High Transaction Costs
Private market real estate has high purchase costs and sale costs. On purchases, there are real-estate-agent-related commissions, lawyers' fees, engineers' fees and many other costs that can raise the effective purchase price well beyond the price the seller will actually receive. On sales, a substantial brokerage fee is usually required for the property to be properly exposed to the market. Because of the high costs of “trading” real estate, longer holding periods are common and speculative trading is rarer than for stocks.
Variability among Regions
However cliché it may sound, location is one of the important aspects of real estate investments; a piece of real estate can perform very differently among countries, regions, cities and even within the same city. These regional differences need to be considered when making an investment, because your selection of which market to invest in has as large an impact on your eventual returns as your choice of property within the market.
Underlying Tenant Quality
When assessing an income-producing property, an important consideration is the quality of the underlying tenancy. This is important because when you purchase the property, you're buying two things: the physical real estate, and the income stream from the tenants. If the tenants are likely to default on their monthly obligation, the risk of the investment is greater.
Source: Ian Woychuk, Investopedia.com
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