Some investors would rather invest in tangible real estate rather than numbers on a computer screen. If you’re thinking of diversifying your portfolio by investing in real estate, it might be worthwhile to learn more about this option.
Real estate investment offers distinct advantages like cash flow and potential appreciation. However, it’s crucial to be aware that cash flow can fluctuate drastically and the value of a property can rise or decrease due to a number of factors.
An approach that is popular for beginners is the buy and hold approach which involves the purchase of the property to generate rental income and potential capital appreciation over time. This strategy is labor intensive and requires you to meticulously examine and assess potential investment opportunities. It’s also quite illiquid which means that once the deal is closed and the money returned, you must find another opportunity to invest in.
Another way to invest in real estate is through REITs, or real estate investment trust. These companies raise funds from shareholders to purchase and manage properties like apartment complexes, office buildings and strip malls to earn rentals and long-term appreciation. REITs unlike individual real estate investments, are publicly traded. They can diversify your portfolio by separating stocks and bonds.
You can also get into real estate investing by becoming your own landlord. You can rent traditional properties or by using the latest business apps and brokerages which allow you to purchase a portion of a home. This is typically easier than becoming a home owner and allows you to be able to balance the desire for physical assets in your portfolio with the degree of separation you desire from your investment choices.