Most investors already realize that real estate investing can be lucrative and provide long-term financial security, but getting started can seem daunting, especially if you’re new to the idea. Just don’t let that stop you from learning more about this trillion-dollar-per-year investment market, which offers a secure, steady way to grow your portfolio for greater financial success.
Here are three reasons experienced investors buy investment properties and why you should, too!
1. Real Estate Investing Provides Diversification
Nearly all financial analysts will extoll the virtues of diversification, but chances are good your investment advisor hasn’t done the same for buying investment properties, despite the benefits this type of holding provides. Diversification brings with it a better balance of risks versus rewards, which translates to one of the best ways to make money over time.
“Don’t plunge your life savings into a hot tech stock,” wrote Bigger Pockets. “Investors everywhere are reaping the rewards of purchasing a property now and having the value increase significantly in the years to come.”
Although property isn’t as easily liquidated as other investment options, it gives buyers something steady to counter any volatility in the stock market or other sectors.
2. Buying Property Can Offer High Returns & Low Risk
This has proven itself – over time – to be one of the best ways to achieve high returns for relatively low risk. In fact, investment properties are one of the only ways to achieve the six percent returns most financial analysts agree are necessary in order to achieve a comfortable retirement, and income producing property in popular vacation destinations can even provide as much as 8-14 percent return on investment.
Low-risk strategies for property investment include:
- Establishing a thorough understanding of the market before buying.
- Creating a plan to generate cash flow.
- Avoiding conventional financing if possible.
- Buying in a market with strong appreciation.
3. Investment Properties Are an Accessible Option for Investors
Buying property is a simple, relatively easy way to get ahead in the investment game, provided you have good credit and have saved up some cash – whether it’s in your checking account or in a Self Directed IRA Account. There are also many different ways to invest, including vacation home rentals, REITs, commercial rentals and buying property in a rapidly appreciating market.
Regardless of your experience level, buying investment properties like turnkey vacation home rentals or land that is ripe for development will add a secure and much-needed layer of diversification to your portfolio and a trusted way to enjoy ongoing return on investment.
Why do you think buying property is a better option than other investments? Share your ideas in the comments!
Learn more about alternative investments by reading Real Estate or Stocks: What Has Better Return on Investment?