This text is offered by Connect Invest.
Many actual property buyers obsess over IRR and cap charges, however overlook the strategic worth of liquidity. It’s no secret that actual property is illiquid—in September 2025, the typical dwelling spent 62 days available on the market. Add an additional month or so for all of the paperwork to be accomplished, and also you’re ready round three months earlier than you’ll see your funding cash when you determine to promote.
Whether or not you’re ready on a 1031 exchange, prepping to your subsequent flip, or simply need optionality in a shifting market, your capital ought to work whereas it waits. And when you might invest in the stock market, it’s much more risky than actual property.
This is one purpose actual estate-backed notes with brief durations are a sensible choice for buyers who wish to keep lively between longer-term commitments.
The Liquidity Challenge
Actual property is largely considered as a longer-term funding, largely as a result of it takes so lengthy to promote. Turning a single-family dwelling into prepared money merely isn’t life like. When you might attempt to promote as shortly as potential, you could possibly lose out on worth should you decrease the worth for the sake of a quick promote.
Even a fix-and-flip takes time to promote, as you must not solely keep in mind the time you spend renovating the property, but additionally the gross sales time. Each day-traded direct actual property funds additionally usually keep excessive money positions to compensate for the illiquid nature of actual property.
However having liquidity as an investor is important for monetary development, even with actual property. It may possibly impression your money circulate and talent to cowl sudden bills or seize new funding alternatives. And conserving money available as a substitute of investing is inefficient, as the worth of your money depletes as a consequence of inflation.
How you can Enhance Your Actual Property Liquidity
There are, nonetheless, methods to extend the liquidity of your actual property holdings. One neglected technique is to spend money on actual estate-backed notes.
Actual estate-backed notes are primarily a debt funding backed by actual property. As a substitute of shopping for a property, you purchase the debt. Which means when the borrower pays again the debt, you get your funding again, plus the curiosity.
It’s a sort of hybrid resolution to actual property that offers you publicity to actual property belongings, however ensures you get a gentle money return each month. You don’t need to be locked into proudly owning property and be asset-rich and cash-poor.
With some platforms, you may even purchase notes as brief as three months. That may be advantageous for buyers who need the benefit of promoting shortly however need publicity to actual property holdings.
Ultimate Ideas
Whereas actual property is often a longer-term funding with little or no liquidity, it doesn’t need to be. There are methods to maintain investing in actual property whereas having prepared entry to money.
Find out how Connect Invest’s short-term choices may also help bridge the hole between offers with out sacrificing returns.
