The stock market is influential for investors who are looking for high returns on their investment, but there’s also a high amount of risk and uncertainty that goes along with such investments. Even slight shifts in the economy or a change to other factors that influence stock prices and value can cause significant losses on your investment.
The real estate market, though, can provide a much more stable source of investment income that you can use as a hedge against the impact of inflation or the swift changes in a volatile stock market. Many investors are turning their attention to real estate as a source of reliable, profitable returns that stay consistent over the short and long-term.
As a real estate investor, you can secure strong gains on the right types of property (regardless of the state of the market) and take advantage of these 4 benefits that real estate investments in your portfolio will offer against poor economic and stock market trends.
1. Sticking to Areas Popular with Investors Can Protect Against Inflated Homeowner Premiums
When homeowners are competing on real estate in desirable areas or neighborhoods, prices typically inflate along with the demand. While spending more on a property as a long-term home might make sense to a home buyer, the increased prices aren’t as desirable to investors who want to turn a profit on resale or rental. When you stick to areas that are popular with investors with similar motivations and cash flow as you, you’ll find that prices will stay more static and not be as affected by increased premiums driven up by homeowners. Competing with investors (vs. competing with homeowners) will help shield you from inflation and keep your numbers in a profitable range on your investment property.
2. Many Investment Properties May Be More Immune to Recession
Investing in the stock market can offer big returns in a strong economy, but it can also be extremely risky when the market dips into a lull or even a recession. Some of your strongest investments can quickly shift down in a volatile market, and it’s the risk you assume when you place your investment in stocks.
However, real estate investments (especially in the commercial and rental markets) are much less prone to losses in times of recession because they provide solutions or services that people will always need no matter the state of the economy (such as food, gas, housing, convenience items, etc).
3. Publicly Traded REITs Remain Solid Over the Long-Term
Publicly traded REITs can be especially advantageous over the long-term of a real estate investment, and give you more investment choices with less capital involved. You can add diversity to your portfolio through REITs, and while they are more prone to losses in times of recession, the liquidity of these investments typically evens out over the long-term in terms of profits.
4. Owning Rental Property Provides a Good Investment Foundation
Rental properties have long been a popular and reliable source of investment income that can be enjoyed in both the short-term and long-term depending on your strategy. Though a real estate investment comes with inherent costs such as mortgage, taxes, and ongoing upkeep, a good portion of these expenses can be offset by the rent you earn on the property with an excess that comes in every month as profitable income. The true profitability of rental properties comes in when the mortgage is paid off, but this type of investment can create positive cash flow that creates a solid foundation in your portfolio.
In addition to cash flow, rental properties also give you the benefits of appreciation on the property, as it increases in value over time due to improvements made to the property. If you strategically choose a property that is located in a growing, promising location, and carefully select tenants who are reliable and trustworthy, you can often see appreciation occur rather quickly.
First Bridge Lending has extensive experience in the real estate investment market and all the benefits you can hedge against inflation and volatile stock market trends by making strategic, smart choices in your real estate investments. We’re local to California and understands just how the market is trending where you’re looking to buy. They can meet with you in person, attend property visits, and advise you on the specifics of the area where you’re looking to buy.
For more information on how a real estate investment can strengthen your portfolio and protect your investment against inflation and volatile stock markets, contact First Bridge Lending directly by calling 415-366-1235.