There are a number of potential benefits to adding real estate to one’s investment holdings. Those include income production, capital gains, and portfolio diversification.
There are also several ways to participate in the market, with varying risks and rewards. However, the possibilities can be overwhelming. To help investors sort through the options and invest smart, here are real estate strategies for the modern investor.
That depends. After all, there are different ways to invest in real estate, including indirectly. That often means purchasing shares in a fund or a privately or publicly held company, such as through a trust. There is also direct investing, which commonly involves owning an income-generating rental property.
As with any other investment, there are advantages and drawbacks to real estate investment. In addition to the benefits listed above, there is the possibility of property value appreciation and protection against inflation.
Depending upon the investment strategy chosen, possible disadvantages may include negative cash flows, liquidity issues, and market unpredictability. There also may be problematic tenants and high vacancies.
Here are the most common options for real estate:
There are also alternative investments available to investors, including residential rental investing, rental property investing, and discounted note investing.
Entering the market through Yieldstreet is another option. The leading alternative investment platform, on which more than $4 billion has been invested to date, offers private-market opportunities. Such offerings are generally less volatile and include real estate. In that asset class, opportunities include real estate equity and a Growth & Income REIT. These are highly vetted opportunities that once were the exclusive province of the top 1%.
Before entering the real estate market, though, investors should:
Set goals. Establish short- and long-term objectives based on personal goals and investment aims and align one’s strategy accordingly.
Decide on an investment option. There are active investment strategies such as property flipping, wholesaling, and traditional renting. By contrast, investments involve putting capital in a venture without day-to-day property management or decision making.
There are also various property types in which to invest, including residential, commercial, and industrial. Yieldstreet’s offerings span real estate types.
Depending on the chosen strategy, and factors such as personal credit, there are a number of financing options available. Those include hard money loans, conventional mortgages, and seller financing.
Whatever strategy is chosen, remember that real estate in the private sector is an “alternative” asset class. This means that it has low correlation to volatile stock markets. Real estate also can diversify investment portfolios, reducing overall risk and possibly improving returns. In fact, diversification is key to long-term investing success.
Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.
However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10000.
Real estate investing remains popular as a potential source for steady secondary income. After all, it can potentially offer tax advantages, property appreciation. and leverage. It can also protect against inflation and provide risk-mitigating portfolio diversification. Investors must just choose the best strategy for them.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.