Investing is one of the best ways to attain financial security and stability in the long run. However, it is highly dependent on your risk profile. Real estate may be a long-term, steady yielding investment but it is not the easiest option, especially for beginners.
It is no surprise as to why real estate is not the first investment option by many, but this might make you think otherwise. Here are four reasons why real estate is the safest choice.
Real estate is lower risk investment.
What makes real estate different from other investment types such as stocks or bonds is that it is a tangible asset. It is not heavily dependent on the competence of a third party or of a company’s management. With a property being a physical asset, it holds value on its own. And this value can increase over time as supply becomes limited.
Real estate has competitive returns.
Stocks and bonds are options that have higher risks. However, the selling point of these higher risks are the higher returns that often come with it. But those high returns only last shortly depending on the market’s performance.
Given that homes are a necessity, there will always be a demand in the market for real estate. It may not provide instant high returns but it has competitive returns from its cash flow and appreciation. The steady cash flow comes from the rental income. With that, you can gain income passively over a long period of time.
Real estate is resilient.
The economy changes constantly depending on the market as well as the uncontrollable external factors. What makes real estate a good investment option is that it is more resistant to change. Often than not, when the stock market declines, real estate turns in a good performance.
If the economy moves towards a downward slope, the real estate market adjusts accordingly. People may resort to renting properties instead of purchasing them. But if the economy goes well, property prices increase. There will be a higher appreciation for land and real estate becomes more profitable.
Real estate gives you better control.
Managing your real estate investments can be done by you. You can control your returns by consciously choosing your opportunities. You can also contribute to adding value to your property by upgrading its facilities and doing renovations.
As with any investment options, real estate comes with its own risks.
- It requires a greater amount of money in order to enter this type of investment.
- It takes a longer investment period given that real estate is less volatile.
- It has a higher learning curve since you must understand how real estate investments work in order to take opportunities to gain higher returns.
- It requires work and commitment to take care of your property and to transact with people.
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