Real Estate vs Oil and Gas: How These Two Investments Are Similar—And How They’re Different
Real Estate vs Oil and Gas: How These Two Investments Are Similar—And How They're Different
While the saying, “never judge a book by its cover” may be a truism, it’s still good advice. Often things may be intentionally dressed to appear as one thing to obscure the fact they are something else. And perhaps more importantly, if we pay too much attention to the obvious, we run the risk of overlooking the true value of what lies within. Countless examples validate these observations, and investing is one of them.
Financial security is a goal almost everyone shares. However, the array of investment options can seem insurmountable to an investor. Moreover, the investment vehicles that can yield the greatest benefits may not be available to everyone. For accredited investors, though, a wide variety of investment options exist provided you follow a good playbook with alternative investments enhancing the options available. Two of the most potentially lucrative alternative investment options are: real estate vs oil and gas.
What Are Alternative Investments?
Even unseasoned investors are aware of common vehicles such as stocks, bonds, CDs, or qualified funds such as individual retirement accounts (IRAs), and pensions. These options are available to most everyone. Alternative investments, on the other hand, are typically higher risk coupled with possible higher rewards. Listed below are several types of alternative investments.
Types of Alternative Investments
💎 Precious metals (e.g. gold, diamonds)
💰 Financial derivatives (e.g. hedge funds)
🛢 Oil and gas
🌇 Real estate
A brief review of the above list may lead one to conclude that these items are altogether distinct; however, the latter two investment options share some surprising similarities, as discussed below.
Comparing Real Estate vs Oil and Gas Investing
Before discussing the similarities, let’s examine the differences between investing in real estate and traditional investment models of oil and natural gas.
Differences Between Real Estate and Oil and Gas Investing
The land has been a source of wealth creation for millennia. And most investors—especially accredited investors that participate in large development projects such as apartment complexes or office buildings—understand the advantages of owning this type of asset. Investing in oil and natural gas has lagged behind as the oil and gas industry has developed during the past century. During the development of the oil and gas industry, direct ownership of oil and gas wells by the acquisition of “working interest” has evolved. As this form of acquisition was not feasible for most investors, the only option was indirect investing, which has significant disadvantages when compared with real estate.
|REAL ESTATE VERSUS TRADITIONAL INDIRECT OIL AND GAS INVESTING|
|Attributes||Real Estate||Traditional Oil and Gas|
|Provides a consistent income||Yes||No|
|Reliable divestment options||Yes||No|
As shown in the table above, the traditional investment model for oil and gas is significantly limited when compared to real estate.
Similarities Between Real Estate and Oil and Gas Investing
For investors who want to capitalize on the advantages of investing in oil and natural gas, direct investment provides the greatest opportunity. However, all direct investment options are not the same. By following the model described in the video below—and taking advantage of the similarities that certain kinds of oil and gas investing share with real estate—you can position yourself for the greatest potential ROI from oil and gas investing.
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Investments in oil and natural gas partnerships are speculative and involve a high degree of risk. Oil and natural gas wells are naturally depleting assets. Cash flows and returns may vary and are not guaranteed. Past performance is no indication of future performance. Nothing herein shall be construed as tax or accounting advice. Investors may lose money. Some of the risks other than those described herein associated with investment in Larimer County Energy Fund are described in the Risk Factors section of the Confidential Private Placement Memorandum concerning the Larimer County Energy Fund accompanying, preceding, or following this Executive Summary. Prospective investors are urged to read and consider carefully the risks described in that section. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the investment opportunity described in this Executive Summary. Neither the Securities and Exchange Commission nor any state securities commission has determined the accuracy or completeness of the information contained within this Executive Summary or in the Confidential Private Placement Memorandum concerning the offering of limited partnership interests. The offering of limited partnership interests is made only by the Confidential Private Placement Memorandum, which must accompany, precede, or follow this Executive Summary, and an investment decision can only be made by the execution of definitive investment documents. Investors in Larimer County Energy Fund are required to be “Accredited Investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933.