Explore the advantages of real estate investing: passive income, inflation resistance, security, and more. Learn why property may be the best choice for you.

There are numerous investment opportunities in the market, from the usual stocks and commodities to the less traditional NFTs and whisky. But everyone’s money is limited, so why would someone choose to invest in real estate over other asset classes?

Passive Income. These two words have been mentioned a lot lately. You should already be familiar with the benefits of passive income, such as the fact that you can practically make money while you sleep (isn’t that the dream?) . However, passive income is just one of the many reasons to invest in real estate.

1. Passive Income

Simply put, passive income is money that can be earned without putting in much effort. Examples of passive income include rental income, interest, dividends, and royalties.

In real estate, investing in either equity or debt can generate passive income. Investing in equity can generate regular cash flow through rental properties, while investing in debt can generate regular cash flow through interest payments.

In any case, if you have idle money, instead of putting it in a savings account that is depreciating due to inflation, make it work for you by generating income that can be reinvested or pay bills.

2. Anti-inflation

In the aftermath of the epidemic, governments around the globe launched massive support programs that led to a rapid rise in inflation to levels not seen in the last decade. Public markets were hit hard as a result, as inflation caused asset prices to be heavily discounted. Higher than expected inflation can have a significant impact on your wealth if not managed efficiently.

Historically, real estate has performed well against inflation because it is closely correlated to the money supply, inflation and wage growth over the long term.

3. Low volatility

While investing in publicly traded assets such as stocks may have substantial returns over the long term, their prices fluctuate daily and can be volatile and often unpredictable. If you have a disproportionate share of these assets in your portfolio, these fluctuations can cause your wealth to plummet over the course of the year, month, or even day.

In contrast, real estate as an asset class is typically more stable and less volatile. One of the main reasons for this is that it takes more time and resources to complete a real estate transaction than it does to purchase a stock. As a result, the volume of transactions is lower and you wouldn’t expect huge price changes in a short period of time.

4. Diversification

You probably already understand the benefits of diversification as well as its importance. Specifically, diversification allows you to achieve one of two goals: a higher expected return for the same risk, or a lower risk for the same expected return. Diversification occurs when the securities in your portfolio are not perfectly correlated.

If one of your investments goes down, other investments in your portfolio will go up, making up for your losses and perhaps even increasing your wealth. Real estate investments are less correlated with the returns of other asset classes such as stocks or cryptocurrencies, so there are potential diversification benefits to including real estate investments in your portfolio.

5. Transparency

Real estate projects are usually more transparent than other financial assets. Evaluating real estate projects is easier than evaluating companies because it is more intuitive to predict the costs and benefits of a property. With costs and revenues more readily ascertainable, project owners are less likely to misrepresent or exaggerate the potential income from the property, as opposed to private company founders who typically overpromise the company’s prospects.

Evaluating real estate properties is also easier for investors than evaluating private equity investments because there are fewer factors to consider and it can be easier to determine if this is a worthwhile investment.

6. Wealth Building

Investing in real estate is an excellent way to build long-term wealth. By owning a property or a portion of it, you can generate regular cash flow through rental income, helping you to build wealth over time.

In addition, if you hold onto a property for a significant period of time and then sell it, you may be able to profit from the price appreciation of the property. The key is to find the right properties to invest in that you think will increase in value over time.

7. Relative safety

Investing in real estate in the form of debt may be safer than borrowing money from a company. With secured debt, your investment is protected by the value of the property, so in the worst case scenario, if the owner of the project is unable to pay you the interest, the property will be liquidated and you will be repaid from the sale proceeds.

However, if there are other lenders with higher priority than you, you may not be able to recoup your investment in full, but you will still receive a large portion of your initial investment.

It’s Not All Sunshine and Rainbows

As always, it is highly recommended that you read all relevant information, including the Key Investor Information Document, before making any investment decisions. In addition to all the benefits, you will also find in it the potential risks of that investment opportunity.