3 good reasons to invest in real estate

If you’re looking to get started in investing or expand your portfolio, you might be wondering where to start. From stocks and bonds to gold, crypto and even the metaverse, the choices can be overwhelming. Maybe you’ve heard that many millionaires and billionaires have made their fortunes in real estate, but beyond that, you don’t really know what’s so great about it.

Let’s break down some key reasons why real estate can be a great investment opportunity so you can decide if you should add it to your portfolio.

Image source: Getty Images.

1. It’s a great way to diversify

You probably know that it is essential to diversify your investments. What you might not realize is how many ways there are to invest in real estate. If your money is currently invested in other vehicles, adding real estate to the mix can be a great way to diversify. And you can also have incredible diversity within your real estate portfolio.

One option is to buy and lease long-term residential rental properties, vacation rentals, or commercial buildings. Or you can choose less traditional avenues such as buying vacant land and renting it out for farming or hunting or subdividing it and selling it. You can also invest in the various commercial sectors – including multi-family, retail, industrial, office and healthcare – through real estate investment trusts (REITs). You can even buy real estate in the metaverse.

This is just a small sample of the many options available to you as a real estate investor.

2. It’s a great way to earn passive income

Most people already have a lot of responsibilities in life. This is why investments that can generate passive income are so attractive. With passive investing, once you’ve chosen your investment vehicles, done your research, and invested, you can continue to make money with little extra effort on your part.

As a rental property investor, you can hire a property manager to take care of everything from marketing, selecting tenants and collecting rent to managing turnover, maintenance and services. repairs. You’ll still want to keep an eye on what’s happening in the market and with comparable properties so you know if you need to make any changes, like raising the rent or even selling, but it should only take very little of your time.

You’ll also want to keep an eye on the REITs you own in case new developments in the way management runs things or in the industry as a whole change how you feel about your investments.

3. The cost of entry can be quite low

Those who have not yet explored the world of real estate investing may assume that you need to be able to afford a home or commercial building to participate. But while private REITs can have minimum investments of $1,000 or more, publicly traded REITs don’t have a minimum investment. This means that with very little money you can invest in a wide variety of commercial real estate sectors.

If you have a large amount of money to work with, say tens of thousands of dollars, but not enough to buy a house or commercial building, you may be able to purchase a small piece of land. If you choose your location well, you may be able to develop and sell the land for a significant profit. You can read more about investing in vacant land here.

You might also be surprised to learn that you can buy an investment property with no down payment. My colleague, Laura Agadoni, shares all the details in this article.

Should you invest in real estate?

Inflation and rising interest rates are serious issues that weigh heavily on investors’ minds right now. Although you have to analyze the numbers on a case-by-case basis to determine if a particular investment might work well for you in this climate, real estate as a whole continues to be a great investment. Here are some reasons:

  • Vacation rental hosts recorded their highest average annual income last year at $56,000. And according to a recent AAA poll, 70% of Americans plan to travel at least as much this year as they did last despite rising gas prices and inflation.
  • Many REITs are actually poised to perform well during and sometimes even through inflation, including those in the rental real estate and timberland sectors.
  • Home ownership is increasingly inaccessible to many due to high interest rates, low supply and high prices. The resulting sky-high rents and low vacancy rates make this a great time to own.

If you like the idea of ​​earning passive income with little money while diversifying your portfolio, the right real estate investment can be a great choice even now.

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