When building your portfolio, it can be hard to find investment opportunities that maximize return on investment while minimizing risk. This is especially true in the current economic climate where low-interest rates have pushed real estate to the back of most investors’ minds, but is this a wise choice?
It’s important to know the best property investment advice for you if you’re still trying to understand the ins and outs of real estate investment. As you’ll see below, there are many compelling reasons to add real estate to your investment portfolio:
1. Balance Your Portfolio
One of the biggest reasons why investors choose to include real estate into their investment portfolio is to help them balance out their portfolio risk-wise. This is especially true for retirement investments where taking risks shouldn’t(in ideal situations) come immediately, but instead come with time as an investor get stronger and readier to spend their capital.
Assets are typically ranked on a scale of one to five, with one being the least risky and five being the riskiest. Within this range, real estate falls in near four-not perfectly safe but as close to perfect as it gets.
Because it ranks high on this risk range, it could make sense to include it as part of your investments as it’ll help reduce the overall risk of your portfolio while providing you with predictable returns over time, which you can be certain of through cash flow from rental properties or future sales.
2. Hedge Against Inflation
Over long periods, prices tend to increase because the cost of living increases for a variety of reasons, from the collapse of a specific industry to technological breakthroughs.
To hedge against inflation, many investors choose to invest in real estate since it’s one of the only assets that have an intrinsic value increase since the cost is based on location, which has nothing directly to do with inflation, while also providing you with a source of income that can be used if capital costs become too high and other investments aren’t performing well. You needn’t physically purchase a property to access this useful protection. Some of the best UK REITs can provide this inflation protection with a simple trade via your stockbroker account.
3. Get Away From Volatile Stock Market Returns
One issue that investors have been facing over the past few years is the great volatility in the stock market. Not only does this make it incredibly difficult to predict future returns, but you also have to deal with more risk because your money won’t be safe if there’s a sudden downturn in the market, which may even cause you to lose some of your money. Real estate investment on the other hand will protect you, for the most part, from the potential for significant losses over time due to compound interest and inflation.
By switching from stocks and bonds into real estate, investors also get access to predictable cash flow that doesn’t fluctuate too much while further avoiding volatility by investing locally rather than globally. Property is a safer investment than equities in the sense that they’re individually less vulnerable to a price crash than an individual share on a like-for-like basis, however, they’re far from risk-free.
The reason why this works is that even though there may be a massive devaluation across some international markets, by investing locally, you avoid these high risks while still seeing good returns over time.
4. Potential For Consistent Cash Flow
Investing in real estate means you’re not just counting on the profit you will get if your property happens to appreciate due to many factors on the market, you’ll also get monthly rentals, which really make the investment all the more worthwhile!
If you hire a good property manager to take care of your property investment, then you will not have to worry too much about the hassle that might come with managing your properties well and making sure the cash flow stays consistent by ensuring there are measures that discourage sudden vacation or defaulting by your tenants. Every investment comes with its own fair share of risks and real estate does seem to come with some of the least amount o risks as an investment vehicle.
5. Use Of Leverage
One of the most effective tactics for increasing profits when investing in real estate is through using leverage or borrowed capital. Instead of putting up all of your own money, you use only a small amount and borrow the rest from a bank or other investors and get a return on both your investment and theirs. With the right kind of leverage, this is one of the most profitable moves you can make, allowing you to accumulate wealth faster than anyone who does it by themselves.
6. Asset Protection
It’s far more difficult for creditors to seize your assets with real estate since they tend to be well-protected from most bankruptcy proceedings, making it an excellent choice where exposure may happen such as during divorce proceedings or criminal charges against you. These rules vary depending on local laws, therefore attend a property investment course or pick up a great property book to learn more about the local laws in your country.
These could cost you more if the home was also taken away from them even if they weren’t involved in any wrongdoing.
Real estate is a time-tested investment that’s proven to provide consistent returns over the years, making it an excellent choice for those who don’t want to take too much risk with their money or aren’t comfortable enough to invest in stocks or other more volatile investments. It’s a worthwhile and profitable investment as long as you do extensive research and have good market analysis skills, allowing smart investments with high returns that’ll snowball over time.