Education

5 Benefits of Real Estate Investing

By Nat Kunes February 4 2020 5 min read

Real estate has long been one of investors’ favorite asset classes, and it’s an especially attractive option in the current economic and technological climate. If you’re looking for a place to potentially grow investable financial resources, here are some of the benefits real estate investing provides.

1.) Multiple Investment Options to Suit Your Situation

Real estate is a diverse asset class that includes many investment opportunities. Everything from flipping single-family houses to renting multifamily apartment complexes falls into this category of investment, and there are plenty of other ways to get involved.

With so many investment options, real estate makes it easy to tailor a portfolio so that it suits your needs. Properties that provide monthly rental income can help generate regular passive income, while properties with high projected appreciation can help grow a portfolio’s overall value. These are just a couple of ways you might adjust a real estate investment strategy according to your situation.

 2.) Low Mortgage Rates Let Investors Leverage Their Funds

Another benefit of real estate investing is that mortgages and other types of property loans make it possible for real estate investors to leverage their financial resources. Rather than purchasing a building outright, a loan lets investors benefit from the potential upside of a property for only a fraction of the property’s fair-market cost. This makes it possible for new investors to get started earlier, and it lets established investors secure more properties than they otherwise would be able to.

Leveraging funds like this has always been one of the main benefits of real estate investment and is an integral component of many investors’ strategies. In the current economic climate with such low interest rates, however, this has become especially powerful.

 3.) Different Asset Class Offers Diversification Away from Stocks

In addition to the ability to leverage funds, real estate gives investors who are heavily exposed to the stock market through stocks or mutual funds an opportunity to diversify their portfolio. Not only are properties a different type of asset, but their returns are often extremely removed from the stock market’s activities.

Diversification has always been a benefit of real estate investment that many people who get into this space appreciate. Like leveraging, however, diversifying has also become an especially important consideration in the current economic climate. As concerns of trade wars and political uncertainty mount, many investors are looking for an alternative to traditional stocks.

4.) Tangible Properties Provide Stability in Uncertain Times

Real estate is distinct in how tangible it is — it’s one of the few mainstream investments that you can physically see and touch. Many investors find this feature attractive on its own, but it also helps stabilize returns on properties. 

Whereas other investments are only as good as the computer program behind them, real estate is something that people have always needed and will continue to need. It’s traditionally a fairly safe investment as a result. Even in volatile real estate markets, the volatility pales in comparison to how much other asset classes fluctuate.

This sets real estate apart not only from many historic assets, but also from one of the newest investment options, like cryptocurrency. Unlike numbers that have an extremely unpredictable value in cyberspace, buildings and land have a fairly settled value.

5.) New Investments for Many Investors

Finally, while the main benefits of real estate investment have always been available to one extent or another, more and more new investment opportunities are now opening up to investors thanks to developments in financial technology (fintech). Through new software and cloud-based platforms, many people can now access investment opportunities that would have previously been unavailable to them. 

No longer are everyday investors limited to only single-family homes or small multifamily buildings, now they can access a wide variety of investments, as a result of the increased operational efficiencies and capabilities of technology. Apartment complexes, commercial properties, and more are all available through real estate investment trusts (REITs) thanks to these innovations.

If you’re looking for a suitable place to invest in the current climate, consider the benefits of real estate investing. While there are still some risks involved with investing in properties, there are also great opportunities. Now is an excellent time to get started or grow an established portfolio.