What Is Your Advice On Real Estate Investing?

What is your advice on real estate investing? Investing in real estate is a great way to build a diverse portfolio. It is a diversification tool and the investor may want to hold 5 to 10 percent of their...

It is a diversification tool and the investor may want to hold 5 to 10 percent of their asset allocation in real estate. Instead of really investing in tangible investment property or real estate investments, there are actual real estate investments that are traded on the market which you can buy and sell easily. They are called real estate investment trusts. So, in theory a real estate is a good diversifier. It really does not move in the same direction as the rest of the investment portfolio. Compared to standard assets like stocks or bonds, there is a relatively low correlation between real estates investment trust returns and the returns of other market sectors. So, if you include real estate in the investment program, it helps you build this diversity. There is a great website out there for people that want information on how real estate investment trusts work created by the National Association for Real Estate Investment Trusts. It is www.nareit.com. So, it's a good compliment to the rest of your portfolio because it doesn't act the same as the rest of it. It sort of helps you spread your risk and causes a greater pool of investment assets.


When it comes to tangible real estate which you can touch and feel, not the entities that trade in the market, there are going to be areas like New York, Houston or Phoenix where the property values have really gone up in price. The biggest question that someone has to ask is are they ready or mentally prepared to put in the time to be a landlord and manage that property, compared to owning a real estate piece that you can buy and sell pretty easily on the market? You can move that property faster when you invest in a real estate trust. You can own a piece of property that is invested in office buildings, apartment buildings or commercial properties, and not just here in the United States, but also abroad. So there is a different level of skill for people that may want to say, "What area or what country do want to buy a property in?" If you're a long distance landlord and you can't make mortgage payments, that's where you have a problem and that property falls out. You are really the person that is going to be responsible, and it may not be as easy to sell or move away from. It is very hard to do that without really understanding the demographics and the economical profile of the city or the state that you want to go to.


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