Some investors would rather invest in tangible real estate over numbers displayed on a computer. If you’re looking to diversify your portfolio, real estate might be a great option.
Real estate investment comes with unique benefits, such as cash flow and the potential for appreciation. It’s important to remember that cash flow can be unpredictable and the value of a home can fluctuate due to a variety of factors.
The buy and hold strategy is a popular one for beginners. It involves buying an investment property to generate rental income as well as potential capital appreciation. This is a labor-intensive strategy that requires you to study and research potential investment opportunities. It’s also relatively illiquid so once the deal is concluded and the money returned it is time to find another opportunity to invest in.
A REIT (real estate investment trust) is a different method to invest in property. They raise money from shareholders to purchase and manage properties such as office buildings, apartment complexes and strip malls to generate rent income and long-term appreciation. REITs, unlike individual real estate investments, are publicly traded. They can provide diversification in your portfolio away from stocks and bonds.
Another way to get into real investment is to become a landlord yourself. You can rent out traditional properties or making use of new business applications and brokerages that allow you to purchase a portion of a property. This method is typically less costly than becoming a home owner and allows you to be able to balance the desire for an actual asset in your portfolio with the degree of separation you’d like from your investment decisions.
