It's no secret that investing in real estate is an excellent way to build long-term wealth as property prices tend to increase over time. But given the current economic conditions, it's natural to have second thoughts about whether real estate is still a good investment this year.
Historically, the housing market has been one of the most influential and lucrative investment opportunities in the past decade, even more so in recent years. However, as investors, we also do understand that no market stays hot forever. High-interest rates, growing inflation, recession, and many other factors can further interfere with our decisions to invest in real estate.
With all that… Is real estate still a good investment in 2023?
Here are a few reasons why real estate remains a good investment this year.
REAL ESTATE HELPS DIVERSIFY YOUR PORTFOLIO
Investing in different asset classes is the key to having a well-rounded portfolio. Because when you hear stories about someone's investments going south, their portfolio likely lacked diversification. At least, that could be part of the reason. And looking at the market conditions this year alone, portfolio diversification should be a no-brainer!
I'm a big fan of diversification, and I’ve done a detailed post on it in the past. You can check it out here. Diversification acts as the perfect hedge against risks. Because when the market fluctuates it will cause some sectors to take a huge hit, while other sectors may still perform surprisingly well, and continue to protect your net worth.
For example, a diversified portfolio would include investments in the stock market, real estate, renewable energy, businesses, etc. All these investment types behave very differently and aren't necessarily influenced by one another.
So, if the value of one investment vehicle fluctuates, the others would remain steady or even outperform the market. As investors, review your portfolio as a whole, does it have a good mix of different asset categories?
REAL ESTATE IS A RELIABLE SHORT AND LONG-TERM INVESTMENT STRATEGY
No investment is free of risks, and the same rule applies to real estate. The key to minimizing risks in real estate is performing due diligence.
Whether you're looking to invest in it for the short term to sell quickly or wish to play the long game by holding on to your property to create additional income streams, real estate has proven itself to be a reliable short and long-term investment strategy.
It offers a wide range of options to choose from, such as actively managing your rental properties, passively investing in commercial real estate syndications, or diversifying through REITs, funds, and so much more.
Regardless of which path you choose, real estate helps you expand your portfolio and allows you to build significant wealth over time despite the temporary ebbs and flows.
REAL ESTATE OFFERS A BETTER RATE OF RETURN ON YOUR INVESTMENT
After you've built a solid emergency fund and still have some cash left on hand, what do you usually do with that? Many people would think of investing in the stock market. But did you know investing that amount in real estate could fetch you greater returns?
Records indicate that the average annual return on the Dow Jones was 4.8% over the past decade, but the average gross yield for rental property investors was 7.7% in 2020 alone. Today, those returns could be much higher depending on where the property is located!
In addition, real estate has a low correlation to the overall stock market volatility and is a tangible asset. So, if you're looking for higher returns, investing in real estate works out to be the better option between the two.
If we look at the numbers further, the average return on investment in the US real estate market is 8.6% per the S&P 500 Index. This number is an indicator of the housing market as a whole. When investors understand the performance within various sectors of real estate, they can take advantage of the best return on their money… For example, the return is 10.5% on residential properties, 9.5% for commercial properties, 11.8% for REITs, etc.
BONUS! – INVESTING IN REAL ESTATE WORKS AS AN INVESTMENT IN YOUR WELL-BEING
Investing in real estate is not only a great addition to your investment portfolio, but it can also do wonders for your physical well-being. Having another piece of property can be viewed as a place for you to land or vacation!
It can offer you a change of scenery, a different work-from-home view, or a fresh place to spend time with family and friends.
Having an additional property is a fun way to mix things up a bit, especially when it caters to your general well-being.
SHOULD DOCTORS INVEST IN REAL ESTATE?
Burnout in medicine is REAL. Nobody knows this better than we do. No matter which specialty you've chosen, there's a high chance you have a limited free time.
Over time, I've realized that having multiple sources of income outside of medicine is no longer a luxury but a necessity. And it's possible to set up these income streams while managing a full-time career. Several physicians and high-income professionals have done it before, and it doesn't require much active participation either.
It's called passive real estate investing. It has the potential to offer a substantial return on your investment, provides greater financial security and stability, and, best of all, puts you back in the driver's seat —to have complete control over your time. Now, isn't that the ultimate goal for many of us?
In Conclusion…
Your portfolio is often a representation of your personality and financial objectives. Real estate is not a get-rich-quick scheme but is a time-tested, reliable strategy that helps you diversify your portfolio and pays off in the long run.
Also, you don't need to own properties to reap similar benefits in real estate.So, whether you're new to investing, have closed a few deals, or are a seasoned pro, there is something in there for everyone.
And if you wish to have access to our tried-and tested-strategies that work and gain step-by-step guidance to grow your real estate investment portfolio, be sure to check out our in-depth course – PASSIVE REAL ESTATE ACADEMY!
Our waitlist is now open, and you can grab your seat here! Let’s make it happen!
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Disclaimer: The topic presented in this article is provided as general information and for educational purposes. It is not a substitute for professional advice. Accordingly, before taking action, consult with your team of professionals.
