REAL ESTATE INVESTING

Real estate investment offers potential financial benefits and a steady income stream, contributing to long-term financial freedom. Evaluating the role of real estate in an investment portfolio requires considering factors such as the percentage allocation to real estate and the inclusion of real estate securities like REITs. Existing home ownership and accumulated equity influence the decision to invest in real estate.

While some individuals may have a significant portion of their portfolio tied to real estate, it is important to avoid overexposure. Real estate can serve as a diversification tool for bond and equity portfolios, providing additional investment opportunities.

Diversification

Investment real estate can provide solid portfolio diversification over the long run because you are holding a hard asset with the potential for high long-term appreciation, says Kristin McFarland, director of strategic partnerships at Darrow Wealth Management.

Rental Income

Rental income can provide a solid revenue stream. “We usually estimate a 2% annual return while you are holding the property,” says McFarland. “That’s a different kind of return than the stock market, but it can sustain you until you cash in on the long-term capital gain.”

Inflation hedge.

When you invest in residential rentals, you own a tangible asset that can provide a hedge against inflation. In fact, rents typically increase 2-3% per year and properties increase in value through appreciation. Therefore, this yields an asset that provides monthly cash flow.