There are numerous ways to start real estate investing. Find out which one best fits you.
There are many ways you can get started investing in real estate, but there’s no single best way to invest in real estate. What matters is finding the method that fits your budget and how much time you can spend managing your investment.
Let’s explore 10 investment options available to you and see which ones may be suited for your next investment. First, though, let’s answer a common question:
Is Real Estate a Good Investment?
The short answer is ‘yes’. Investing in real estate is absolutely essential for anyone looking to secure their financial future. Real estate should be one of the core pillars of your investment portfolio for two crucial reasons:
- According to a recent research paper from the San Francisco Federal Reserve, real estate has historically generated rates of return comparable to stocks and equities with much lower volatility.
- Real estate investment returns are largely not correlated with stocks or bonds. (Hat tip to Ben Carlson over at A Wealth of Common Sense for his work on this topic).
These two points may sound a bit academic. What it means for you is high rates of return without the roller coaster ride of investing in stocks.
Real estate investments also have a hidden benefit that we don’t normally think about: illiquidity. Some investment advisors tell you that investing in illiquid assets is bad because you might need that money quickly. Trying to unwind a real estate investment can take a lot of time and incur large financial penalties and taxes.
The hidden benefit of illiquidity is that it prevents us from becoming our own worst enemies. Great investing requires staying invested long-term without being swayed by the ups and downs of the stock or real estate markets. By putting up financial barriers that keep you from making decisions based on fear or greed, real estate investing lets you reap the benefits of the most powerful wealth-building tool ever imagined: compounded annual returns.
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