Building RE Equity via Public Companies

This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate Report…

Discussion Outline

• What defines a “public” company?

  • They go from private to public via an Initial Public Offering (IPO)

  • Securities trade in the public markets (NYSE, NASDAQ)

  • Business and financial information disclosed to the public on a regular basis

• Ways to invest in publicly traded companies

  • Stocks = Equity = Owner = Wealth Creation

  • Bonds = Debt = Creditor = Income Generation

  • Derivatives (options & futures) — hedging, speculation and income generation

  • Investing vs. Trading (own vs rent; local vs tourist)

• Many people own public companies directly in the form of individual stocks and/or participate indirectly via ETFs, mutual funds and 401k plans

• Typically, larger than private companies

• Regional, national or international footprint

  • Private companies tend to be local, especially in the residential RE space

• Continuous and real time “price discovery” while the markets are open

  • Subtle but important point

  • Makes them highly liquid

  • Contrast this to direct ownership of real property

  • Highly efficient vs highly inefficient pricing (objective vs subjective)

  • This is the key difference between stocks and real property!

• Stock prices are a leading indicator of…

  • Economic activity at the index level (DJIA, S&P 500, etc.)

  • Industry trends at the industry level (banks, home builders, etc.)

  • A company’s outlook at the stock-specific level