With the ability to generate consistent income, a track record of long-term capital valuation, and the
ability to diversify investment portfolios, real estate is used by many knowledgeable investors to build wealth. In fact, more people have historically outnumbered those who have diversified part of their portfolio into real estate investments.
What are the benefits of investing in Real Estate?
Real estate offers a unique combination of short-term and long-term income potential, as well as diversification not found in other asset classes.
Consistent Cash Flow:
For many investors, the ability to generate consistent cash flow is one of the most attractive aspects of real estate investment. Some examples are apartment stocks that generate income from rent payments, or loans that generate income from interest payments. Small equity investments such as housing can be fully purchased, but other investment tools such as funds provide investors of all sizes with access to assets that generate greater income.
Long-Term Gain Potential:
Equity ownership offers the unique potential to generate both cash flow and long-term capital valuation. Both residential and commercial real estate has a track record of long-term valuations comparable to long-term investor portfolios.
As an asset class that is less correlated with the stock market, private real estate offers wise diversification. By diversifying
investment portfolios across and across uncorrelated asset classes, B. Private real estate, investors reduce the risk of unnecessary losses and create more stable and profitable portfolios
What does Real Estate offer that stocks and bonds doesn’t?
Real estate investments usually complement portfolios that make large investments in equities and fixed income.
Because of its unique characteristics, it can offer benefits not found in the stock market.
More consistency, less volatility:
Private market real estate is traded in separate markets and therefore has little correlation with stock market performance. This difference, combined with the inefficient private market dynamics and much less significant daily changes in value, makes its performance much more volatile and stable than the stock market.
As a hard asset, real estate is one of the few assets that can hedge inflation. Of course, the supply of land is limited, so it is of intrinsic value. Its value increases as there is a shortage of land, especially in high-demand areas.
How do real estate investments earn money?
Real estate can earn money over the short term and long term through income as well as appreciation.
Debt investments such as, for example, mortgages can usually earn interest at a fixed rate of return. Loans are often less risky than equity investments and are attractive to those seeking income. Equity investments can generate income through rent payments. As a long-term investment, equity-owning real estate investors can generate significant profits over time, depending on market demand and occupancy.
Investment real estate generates income from payments to tenants, but real estate itself can be valued. For equity investors, when a property is sold, it can generate income in the form of a lump sum payment in addition to the income previously earned during the investment period.
How long do real estate investments last?
Real estate is generally a long-term investment and usually has the highest potential income available
over the years.
Real estate tends to be an illiquid investment, especially in the private market. This characteristic means that real estate sales are slow, but it can also reduce the volatility of liquid assets such as listed stocks and bonds.
The holding period or period of real estate is usually several years. Institutional investors hold commercial real estate for an average of 7.6 years, while direct investors who own residential real estate can hold it for a longer period of time 12.
Fund rise recommends that investors expect a minimum holding period of 5 years.
What are the options to invest in real estate?
Investment opportunities fall into two categories: active (hands-on) and passive (hands-off). Each approach
has different strengths and weaknesses.
The active property is the direct ownership of the asset. This approach gives investors more control, but more responsibility and risk. Aggressive investments in rental properties, wholesale, home flipping, etc. are often costly and time consuming and require some expertise to succeed.
Passive real estate investors simply provide capital and let professionals invest in real estate on their behalf-often through funds. Passive investors are less responsible and generally have better access to investments of different types and sizes. Options such as REITs, investment trusts, and real estate investment platforms tend to be hassle-free and easy,
without the need for specialized knowledge.
So, our advice is to start investing in Real Estate as soon as possible!