Advantage of Direct Investment in Real Estate

Compared to an indirect investment in real estate, a direct investment in real estate has the advantage of:
a. Ability to more leverage
b. Lower commission
c. Lower political risks.

The question seems a bit short and unclear for a Level 3 question, but perhaps answer A by process of elimination?

Answer C seems like it is either the same or greater for direct investments in a risky country.
Answer B seems incorrect because you’re typically paying a realtor/agent a commission on new direct investments in real estate.
So that leaves Answer A unless someone explains differently. I guess they are saying as a direct investor you can buy property with a significant amount of leverage if you choose. While if you are simply an LP in a PE fund, you cannot control the level of leverage and must accept whatever leverage the GP decides for everyone. Same limitation if you’re buying shares of a REIT.

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Thank you, Greybeard_The_Elder.

Answer A looks correct by process of elimination, as you said.
I am confused because I think Answer C could be either correct or incorrect.
It seems correct when you invest in less risky country.

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I guess what they are implying is that either direct or indirect investment into a non-risky country (for example either directly buying real estate or investing into a real estate PE fund there) can be about equally low risk from a political risk POV. You have rule of law there, political and economic stability for the most part, etc.

I would assume B as with the direct investment, you’re cutting out the REIT/REOC company that would still pay those commissions and fees.

The commission on buying REIT shares is lower than a direct investment in real estate. You can buy REITs on E-Trade and other platforms for less than the multiple percent brokerage fee on private sales. Note that the question does not mention fees. If it did mention fees, then funds with management fees and carries would typically be higher than the fees incurred by direct investment. The question however specifically omitted any reference of fees. The commission on a PE investment by an LP into a GP is zero, the compensation is by way of management fees not a sales commission. But if you buy commercial real estate there is typically a broker making a chunky commission at closing.