Group Research Project 1: Investing in Non-Financial Asset

Real Asset Project
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Investing in Non-Financial Asset
Real asset or non-financial asset has the physical value. Such assets include real estate, machinery, equipment and vehicles among others. Such tangible assets give the real net worth. The non-financial asset is usually difficult to sell due to the existence of inactive market buyers and sellers that provide the price of such assets. Therefore, a seller needs to find a potential buyer then negotiate the sale price. The investors in real assets may choose either direct or indirect type of investments (Woychuk, 2017). Under the direct investments, an investor owns the asset, hence is wholly responsible for the asset and exercises full control of the asset. On the other hand, indirect investor allows other people to buy and sell an asset with no assumption of ownership of the asset (Woychuk, 2017). The buyers have no responsibility of the asset, but only get the shares of returns distributed among the indirect investors. Therefore, the implied investor exclusively invests on the expertise of the personnel using the investment asset. For more clarification, the present essay answers the below questions.
* Major categories of Real Assets and Individual Real Asset on each class
Real assets come in numerous groups. However, the well-known types in the USA include natural resources, real estate, and infrastructure.
Natural Resources
The natural resources as real assets fall into four categories namely:
1 Energy resources: the energy resources usually focus on the oil and gas that give income from the reserves, offer exposure to the commodity price and provides the potential and modest values.
2 Timberland and Forest: the timberlands and forest give returns from the production of the commodity especially through biological growth. Therefore, the classification of the assets under such category falls into timber production and harvesting (Best, 2017).
3 Agriculture: most investors value agriculture as a real asset since many invest in farmland that provides exposure prices for commodities and land. Therefore, rental payment and production of the products on the farm give high returns (Mercer, 2014).
4 Mining and minerals: most investors value opportunities in income-generating reserves such as minerals. Besides, the investors generate a lot of returns through private equity-focused strategies (Mercer, 2014).
Some examples of natural resource classification include an operating utility that exhibits high income to increase in maturity. Others include exploration and development that show high growth with increasing construction risks.
Infrastructure
Investors usually value infrastructure even though the asset exhibits high barriers to entry, economies of scale, sensitivity to inflation, inelastic demand and durability. The classes of infrastructure assets include production and harvesting that have high yields with an increase in maturity, pre-construction or private partnership with increased construction risks and high income. Besides, the airport in construction is another class with low growth rate with an increase in construction risks while operating toll road class gives moderate growth with increasing maturity among others (Mercer, 2014). The various types of infrastructural assets include;
1 Core infrastructure investments: the assets provide an income stream through regulation (Mercer, 2014).
2 Core plus investments: the assets usually entail mature operations with massive economic exposures (Mercer, 2014).
3 Opportunistic investment: the assets face massive economic exposure and are available in the development phases, hence face high exposure to the emerging market risks (Mercer, 2014).
Real Estate
Real estate is tangible assets that in the form of land and permanent improvements. Besides, some investors quantify real estate as industrial operations that correlate with valuing, acquisition, production, and selling of the real property assets. In most cases, real estate helps in the identification of tangible assets such as lands and buildings, assists in the demotion of the rights associated with the ownership and the use of physical assets. Lastly, real estate helps the industry and business operations that associate with the disposition of the tangible asset, process, and acquisition (Woychuk, 2017). The various categories of real estate include;
1 Residential real estate investments: such real estate is apartment buildings, houses, vacation houses and town houses where a person or family pays to live on the property. In most cases, the duration of stay in such residential real estate is upon the rental agreement between the owner and the tenant in the lease agreement. However, most of the residential real estate cover twelvemonth basis, especially in USA (Perry, 2017). The residential properties are usually high in the market that contributes to the stability within minimal impacts whenever there is a loss of a single tenant. In the USA, the residential property owners usually get the government-insured financing that lowers the interest rates on the mortgage hence it enhances the returns on investment. However, the investors or owners bear the risk of operational costs for the duration of the lease (Perry, 2017).
2 Commercial real estate: the commercial real estate involves the leasing of apartments such as office buildings and skyscrapers in towns or any locality. An investor may build such flats and lease them out to companies and small entrepreneurs who then pay rent to use such properties. Most of the commercial real estate agreements involve in the multi-year lease agreements due to high stabilities in the cash flow and protection of the owners in circumstances when the rental rates decline. However, ...