One of the most fundamental rules of investing is to diversify. Simply put, you do not want to put all your financial eggs into one basket. You spread out your financial resources so that losses do not wipe you out entirely. That being the case, real estate can be an incredibly good addition to a diversified portfolio.
Are you looking to diversify right now? And if so, are you into real estate yet? Any investor looking to diversify should at least consider real estate. It brings too much to the table to simply ignore it.
1. It Almost Always Appreciates
Real estate is a tangible asset that is almost always appreciated. Sure, you can look at the short-term market and see price fluctuations from time to time. But historically, real estate has almost always appreciated over long periods. That is its biggest advantage.
Taking advantage of its nature means treating real estate as a long-term venture. One strategy for doing so is obtaining rental properties – either commercial or residential. The goal is to obtain properties, maintain and improve them, and reap the rewards of monthly rental payments.
2. It Generates Income for Life
Real estate provides returns in two ways. The first is monthly rental income. It is essentially income generated for life. For as long as you own the property, you will have the opportunity to keep it filled with income-generating tenants.
As for the second return, it comes when you sell the property. You might spend 20 years building a portfolio of properties. You then hold on to them for another 20 years before selling. At sale time, you reap additional profits as a result of higher property values.
3. It Offers Considerable Stability
A properly diversified portfolio offers a good mixture of high- and low-risk investments. Real estate is ideal because it enjoys considerable stability. Compared to more risky investments like stocks and commodities, real estate tends to remain fairly steady. A significant investment in real estate can balance out the more volatile parts of an investor’s portfolio.
4. There Will Always Be a Demand
One of the keys to real estate stability is demand. For as long as people roam the Earth, there will be a demand for real estate. People need places to live. Companies need places to do business. That is never going to change. Demand may fade slightly during times of economic stress, but investors stand to do very well if they can wait things out. Once the market starts to rebound, gains usually make up for any previous losses, and then some.
5. You Don’t Have to Be a Landlord
Many small-time investors have avoided real estate for the sole reason of not wanting to be a landlord. If that sounds like you, there’s good news: you don’t have to be a landlord. You can invest in real estate through a specialized ETF. You can pool your money with other investors in a deed trust fund.
You can even join up with a group of like-minded investors and start your own hard money lending firm. Actium Partners is one such firm located in Salt Lake City, UT. They make money for their investors by lending to other property investors looking to purchase rental properties.
Real estate has proven to be one of the most lucrative investments over the last 50 years or so. Many wealthy individuals accumulated their wealth by investing in property. If you are looking to diversify your portfolio, and you should be, real estate is definitely worth a look. It offers stability, generous returns, and plenty of growth opportunities.