A constant topic of discussion at Cornerstone Financial Services is investment diversification. Most people think that means some mix of stocks and bonds.
But there are other alternatives available for investors to reach their goals. For example, one often overlooked investment is real estate, which can be a hedge against volatile markets.
One of our firm’s goals is to educate. As such, this post is the first in a series focusing on the potential and viability of real estate investing.
Benefits of Real Estate
Real estate assets can both appreciate in value and provide income. And generally speaking, real estate is not tied to the prospects of the market, so a tanking stock market won’t necessarily tank a real estate portfolio. The same holds true for inflation – real estate can hedge against it.
There are many real estate investment options out there. An apartment complex, a retail plaza, a factory – while vastly different individually, all fall under the real estate umbrella.
Beyond that, real estate can be sector-specific. There is real estate focused on healthcare (medical office buildings), logistics (distribution centers), automotive (manufacturing facilities) and more. Sector variety allows for diversification, which is a benefit of well-designed portfolios.
The below chart provides a good summary of real estate investing relative to other options.
Many Ways to Invest
A key decision is how to invest in real estate, particularly for high net worth investors.
Do you want to invest directly and own the real estate yourself? That may also involve maintenance, marketing, lease management and so on.
Or, would you rather invest in assets managed by professionals, including real estate investment trusts? This method is more “hands-off,” but involves paying management fees and other expenses.
Both options have their pros and cons, along with different tax implications. So, it’s key for investors to fully understand these details before investing.
Finding Your Fit
Choosing how to invest in real estate should be based on personal preferences. Again, it’s critical to know the investment details, and perhaps more importantly, how they compare to other real estate options.
And that’s exactly what we’ll discuss in the next part of this real estate investment series.
Securities offered and sold through CoreCap Investments, Inc., a registered broker/dealer and member FINRA/SIPC. Advisory services offered through CoreCap Advisors, Inc., a registered investment advisor. Cornerstone Financial Services and CoreCap are separate and unaffiliated entities.