Why is real estate investment attractive?

Real estate investment suits them best who are keen to assure a future income stream from a property of any type of residential, commercial, industrial, etc. Investment in real estate is attractive because it can offer several advantages over other investment types. Also, real estate investment provides real estate investors Houston with opportunities for inflation hedging, stability, higher returns, and diversification. 

real estate investment

The attraction of real estate goes up many more times because it enjoys low volatility as compared to bonds and equities. It is capable of providing a steady flow of income with an average return of 9.85% over five years, as revealed in the data published by the National Council of Real Estate Investment Fiduciaries (NCREIF) in July 2018. Moreover, these are risk-adjusted returns that are highly competitive.

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In this article, we will look at the other advantages of investing in real estate.

Tangible asset value is high

Real estate is a tangible asset made of brick and mortar that places it on solid ground than stocks and bonds from the investor’s perspective. The returns from stocks and bonds depend not only on market factors but also on the competence and integrity of debtors and managers that lead to the principal-agent conflict. In the case of real estate, investors need not rely on managers and debtors to protect their interests because the market itself takes care of it. Investments made in Real Estate Investment Trusts are treated as estate securities and guarantees a minimum percentage paid as dividends or profit.

Stable income is more attractive

The total return accrued from the rental income from properties in which investors have put in their money is a big attraction. According to studies, between 1977 to 2007, over a 30-years period, almost 80% of total real estate return in the US emanated from income flows. It helps to reduce volatility because investments that rely much more on income return appear to be less volatile than those that depend more on capital value return. Naturally, real estate is also attractive than other traditional sources of income. There are a lot of real estate experts in the market but you need to find the right one. Roth Capital can provide investors with predictable, high yield and low risk returns.

Inflation hedging

The positive relationship between the real estate demand and GDP growth imparts inflation hedging properties to real estate investment. As economies develop, it pushes up the demand for real estate and drives rents higher, which leads to higher capital values. As a result, real estate tends to sustain the purchasing power of capital by shifting some of the inflationary pressure to tenants and even by absorbing some of the inflationary pressure through capital appreciation.

Portfolio diversification

Investment in real estate has vast diversification potential. The correlation between real estate and other major asset classes is not only low but, in some cases, negative.  If you add real estate to a portfolio of diversified assets, it will reduce the volatility of the portfolio and the return per unit of risk that it would provide will also be higher.

If you are looking for liquidity, then real estate investment is not for you because it lacks liquidity. It is not easy to convert real estate into cash or cash into real estate because the process takes time, and there are uncertainties.

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Eva Vergis

Eva Vergis is a notable and influential lifestyle writer. She is a mom of two and a successful homemaker. She loves to cook and create beautiful projects with her family. She writes informative and fun articles that her readers love and enjoy. You can directly connect with her on email id- [email protected] or visit her website www.lisaeclesworth.com