When it comes to investing, some investors feel more comfortable with tangible real estate than numbers on screens. So, if you’re considering diversifying your portfolio by investing in real estate, it may be worthwhile to find out more about this option.
Real estate investments offer unique benefits such as cash flow and the potential for appreciation. However, it’s important to note that cash flow can fluctuate drastically and the value of a property could increase or decrease due to a number of factors.
An approach that is popular for beginners is the buy and hold approach that involves buying the property to earn rental income and potential capital appreciation over time. This method is labor-intensive and requires you to meticulously research and vet potential investment opportunities. It’s also quite illiquid that means that after the deal is closed and your money is returned it is time to find another opportunity to invest in.
Another option to invest in real estate is to use a REIT, or real estate investment trust. They raise money from shareholders to buy and manage properties such as apartment complexes, office buildings and strip malls to generate rental income and long-term appreciation. Unlike individual real estate investments REITs are listed on the market and provide some diversification from bonds and stocks in your portfolio.
You can also make a start in real estate investing by becoming your own landlord. You can do this by renting traditional properties or by using new business apps and brokerages that allow you to buy a small portion of a property. This is usually less expensive than purchasing a house and allows you to make a distinction between the desire to have a tangible asset in your portfolio while retaining the degree of separation you desire.