While investing in rental real estate can produce a nice income, it can also be a great deal of work. Unlike simply calling an investment advisor and purchasing shares of stock, buying property can take time and, in many cases, physical effort in terms of getting it up to par prior to even looking for tenants.
Yet, even with the additional amount of time and work that it takes, there are several reasons why real estate can be an attractive asset to add to your overall portfolio.
Potential for Return
Throughout the years, investing in real estate has provided many investors with a nice return, even in comparison to other asset classes. Plus, in addition to the potential for growth, you are using “other people’s money” to pay down the balance of the mortgage.
Adding real estate to your portfolio of investments can also help to diversify. Over time, real estate has had a low correlation with stocks and bonds in terms of performance. One reason for this is because the returns that you generate from real estate are driven by different criteria than many other types of assets.
Because the return that you generate on real estate is more dependent on periodic asset valuation, it will typically not have the same amount of volatility as investments that are made in stocks or other assets that are listed on an exchange.
In many ways, you have much more control over an investment in real estate than you do with certain other assets. For example, a property may see a substantial increase in value by obtaining various updates.
While an investment in real estate can take more time to manage than other assets, you can also control this by hiring a property manager to take over tasks such as maintenance and working with tenants. This can allow you to free up time for other endeavors, while at the same time still reaping the benefits of your investment. For more information on how to choose the best property manager for your investments, Contact Us.