10  Real estate

10.1 Introduction

Along with stocks and bonds, real estate is one of the biggest asset classes in the world, if not the biggest. However, most real estate is not traded in liquid markets, thus making the real estate market much less efficient to invest in than the stock and bond markets. Valuation of real estate is more similar to real assets and we have to use valuation methods described in chapters 7 and 9.

Investing in real estate is considered more risky than fixed income but less risky than stocks. This is a huge simplification, as investing in real estate comes in different varieties and most often with leverage, increasing the risk level towards or even above that of stocks. A key difference to stocks and bonds is the low ...

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