Why you need to add real estate to your investment portfolio

We all, to some extent, recognize the potential financial benefits we could get from real estate investing. It goes without saying that there are many benefits of investing in real estate that outweigh the costs, and you as an investor stand to enjoy a steady flow of income to secure financial freedom for the long haul.

Real estate has proven to be one of two major investment spikes to wealth growth, the other being financial market. The key to investment success is spreading your investment over a range of assets and this is what smart investors do. Creating a balanced portfolio means you are spreading your money across various asset classes: stocks, bonds, and real estate.

This year holds prospects for investors given the fact that the property market registered a positive growth of 0.93 percent in the first quarter of the current year, after 12-quarter contraction and the momentum is expected to be sustained as the broader economy continues to pick up.

Here are some benefits associated with real estate investing when you add the asset class to your portfolio.

Portfolio Diversification

Have you spoken to a financial planner about investing? If yes, then you must have been told about the importance of diversification.

When you diversify your portfolio, you are spreading out the risk. Real estate serves as safe tangible assets to minimize risk in your portfolio. This holds true because real estate reacts differently to economic conditions compared with equities and bonds.

Risk never disappears in the capital market and there are numerous factors beyond your control that can negatively impact on your investment but real estate gives you more control of your investment because your property is a tangible asset.

Value Appreciation

The secret to success in real estate is investing at the right time in the right location. If you’re aiming for both short and long-term gains in your investment portfolio, then real estate should be thrown in. One major benefit of real estate investing is the appreciation of capital assets (land) overtime. In other words, your property’s value will worth way more than 30 years now.

Steady Income

This is no brainer. Smart investors diversify to real estate for the steady flow of cash they earn in the form of rental income. Depending on the location, you could be earning significant income to cover your expenses, with extra income in your pocket. Urban centers tend to reap higher income because demand is high in those areas.

If chosen wisely, you can secure a steady income flow for a long time, and even save for retirement. And you do not have to stop investing in one property a time; you can increase the pace and invest in multiple properties, to increase your positive cash flows.

Long-term financial security

One of the big rewards of diversifying your portfolio to real estate is financial security in the long haul. Owning a property gives investors a sense of security because of the property’s appreciation in value overtime. This means your property’s value will most likely increase because land and building are appreciating asset.

With this, you have peace of mind that you have enough money saved to meet emergencies and future financial goals.

Hedge against inflation

An inflation hedge means you are investing in an asset expected to maintain or increase its value over a specified period of time. This is why inflation is considered a hedge against inflation since property value tends to increase in times of inflation.

Real estate investors embrace inflation because as the cost of living increases, so also their cash flows. It is an appreciative long-term investment with inflation-adjusted rental income.

By investing across different asset classes over long periods of time, you increase the likelihood of achieving your long-term investment targets. While having other asset classes in your portfolio is a smart move, but real estate has proven again and again that it is superior to other investment classes, and it is advisable you include it in your portfolio.