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When building an investment portfolio, one of the better commodities to consider is real estate. While still affected by the global futures market, real estate is able to remain relatively independent from the fluctuations and remains a safer option. This is especially important for first-time investors or people who do not want to claim a risky portfolio option.
There are general recommendations for investing in real estate, and here are a couple of them:
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First is to remember that the primary residence is generally not a good investment. Unless the home owner lives in an appreciating area and is willing to move once the market value is high, the primary residence is not something that earns a lot of profit. It’s a simple case of supply and demand. Even if the demand is high, there will be less profit if supply is short. That is why most real estate advisors suggest looking at industry trends and investing in developing areas. Factors to consider are job growth in the area, GDP growth, and economic development.
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Second is to consider the real estate investment trust (REIT), which is defined as “a security that is sold like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.” In general, REITs are seen as a safe option for the average investor to test the waters. However, these, more than other types of real estate investments, are dependent on the volatility of the stock market. Given the recent recession, investors may become disheartened by the low returns and may pull out too early. Investors should consult with a real estate advisor and do heavy research before considering a REIT.
There will never be a good time to invest in real estate, as this type of commodity will always be around. Thus, many recommend entering the competitive arena of investment through real estate.
Tony Hartman, a Denver-based investor, has helped many people with their business and real estate decisions. As a senior managing partner at Mark Private Capital LLC, he is on a mission to educate the public about safe investments. For more information about him, view his LinkedIn page.
