Whatever type of investor you may be, real estate is usually a low-risk and potentially profitable option for your money. There are plenty of factors which mean that real estate is an asset class in a category of its own. There are lots of advantages, but quite often real estate is not as simple an investment option as other assets.
If you already have a fairly extensive investment portfolio, then it is worth noting that independent financial advisors often suggest that 15-30 per cent of a portfolio should lie in real estate. This is because in general, there is almost guaranteed to be a fairly consistent supply and demand. Therefore, real estate enjoys a stability which stocks and shares for example don’t often have. Unlike other financial markets, you will usually find that property values fluctuate cyclically. In the rental market for example, greater demand for space will see values and revenues increase. Once it reaches a certain level though, the market will swing in the other direction. As a result, it is usually possible to plot the broad direction of the real estate market. It is a far cry from the wild and often sudden fluctuations of the stock exchange.
Another benefit of real estate investment is that its performance more directly lies in your hands. If you own a property, you can always make repairs or improvements, which consequently will increase its value. In addition, given that rent is often linked to the rate of inflation, real estate investment allows you to also hedge against inflation which is not always the case with other asset classes. Perhaps the most attractive advantage of investing in real estate though is the typically steady capital gains which you can expect to accrue. At the end of the day, there is a consistent global growth in the demand for living and working space. Consequently, it is also matched by a consistent increase in real estate values.
Having said all of this, there are a number of down sides to real estate investment, too. There are several onerous costs which go hand in hand with investing in property. For example, the costs involved in completing a transaction can be particularly high. And if you are looking to rent your property, it will need to be managed which is an ongoing cost that needs to be factored into your investment. Unlike cash, stocks or bonds, property is also complicated to acquire. Identifying a property can take months in itself and even when you have narrowed down your search, there is no guarantee that a deal will be completed. All of this can cost time and money for no return. Financing a property purchase is also a complex business and it is well worth consulting experts such as 1300 Home Loan about your options.
In addition to all of this, there are a variety of methods to choose from when investing in property. Each one carries its own set of varying risks and benefits. If you are going to be the sole individual, direct owner, then you make all relevant decisions but must face managing the property directly unless you pay for a management agent. Meanwhile, a partnership with close associates spreads the hassles and the risk but limits your profits. At the other end of the scale, investing with a real estate trust means little hassle but placing your money firmly in anonymous hands. The choice is yours, but either way there is a lot to be said for real estate investment.