Here's what you should know about alternative investments and how you can use real estate investing
Many investors are now hooked on the hottest investments available, the NFTs and cryptocurrencies, as NFTs hit $22 billion in 2021. But real estate is also very hot right now, even with unfortunate events that happened because of the pandemic. Real estate managed to grow to $10.5 trillion in 2020. Even casual investors who don't know real estate should consider this viable and long-standing hot market investment. The question is how to enter and turn traditional investing into high-yielding returns.
Savvy investors look to diversify their portfolios. Real estate is one of the most varied investments because you have the potential to profit in any number of ways, including appreciation, rental income, mortgage interest, or even the sale of assets.
And while real estate investments have historically been stable, investors are reimagining what real estate alternative investing can enhance the overall performance of a financial portfolio.
"And the most attractive part in real estate investment is its ability to deliver a long term reliable source of income."
Difference between alternative and traditional investment
When it comes to financing, it's hard to tell what will happen next. There can be many time-sensitive options. Investors wish to create a diversified portfolio that considers alternative investing to complement traditional options. Such considerations are a significant reason why alternative investment is proliferating. Traditional investment similar to trading stocks and bonds can offer various investment structures.
Markets can earn various returns with an understanding of overall benefit over time. Unlike stocks and bond trading, alternative investing can use real estate assets, among many others that focus on higher returns compared to traditional returns.
Alternative investments, including private equity, real estate, venture capital, hedge funds, and more, can provide steady (and sometimes 7% or more) returns with a different risk profile than stocks. And there are tax incentives for investing in alternative investments. At the same time, these institutions are illiquid, which means you can't readily access your money without incurring additional fees or relinquishing control to fund managers or other financial institutions as with traditional investing.
You might want to invest in alternative real estate investing to focus on turning more significant returns on your investments, beat the market, and hedge your positions against a faltering market. Like all investing, alternatives have risks. It goes without saying that you should research these investing options before diving in.
Which is a better investment, stocks or real estate
This classic investing question is which is a better investment: stocks or real estate? There are many factors to consider before making that decision.
When stocks are risky, investing in real estate is not necessarily a bad idea. Real estate differs by knowing that you are participating in a hard asset. There are great opportunities that include acquisition, rental income, cash, and choices of being an active or passive investor.
Different ways to invest in real estate
Real estate offers many ways to invest. As an investor, it's solely up to you whether you want to buy your own home, be a landlord, invest in crowdfunding, REITs, or RELP. Consider thinking about your risk tolerance and the targeted returns compared to risk.
If you want to become a passive investor, the most common way is to invest through a company with private equity that offers significant returns.
Diversify portfolio using real estate
You might have heard the term, diversify. Most notably, it's the practice of spreading your financial risk between assets. However, you might not know that diversification can be a powerful wealth-building strategy. That is if you're using real estate.
The inherent risk in any one stock or real estate sector poses an attractive opportunity in the other. An investment portfolio should never be straightforward, however. It has to be diverse enough to provide the returns you need in several different areas, and it should contain high-quality assets that minimize risk. The trick is to ensure that your portfolio is sustainable.
Get your passive income from real estate investment.
Real estate is one of the most sought passive income that investors look into nowadays. It's not just the attributes of having a low correlation on conventional assets but also its hedge against inflation.
Real estate gives many opportunities for passive income streams, allowing you to invest and reach your financial goals without doing too much and actively trading your time for your income.
There are different types to choose from, whether you want to be an active investor or not. For those who don't want to manage properties, especially investors, here are options that can generate the same returns using real estate investment trusts, crowdfunding, and syndication.
Likewise, passive investing is not for everyone. If you consider the many ways to earn passive income using real estate, you should first know what's involved.
First, passive income is an investment strategy to fund an entity that doesn't require your active participation. It is similar to investing sums of money in the stock market. Still, when investing in real estate, you don't need the daily management and upkeep or construction projects inherent in converting these assets. The options you have come through your choice on how and what to invest.
Three types of real estate investment for your passive income
REITs, Crowdfunding, and Syndication.
First, when we talk about REITs or real estate investment trusts, you buy shares, contribute money, and gain monetary benefit in return.
Syndication is another type of real estate investment. In syndication, you participate with other investors in a real estate deal or project to raise capital to improve an asset while someone else is doing the work.
Lastly, crowdfunding is when you join a group of people, pool your capital together, and purchase a real estate property, unlike REITs investors who enjoy the tax advantages of crowdfunding.
You might wonder why Syndication and Crowdfunding are somehow the same. However, the difference is that syndication investors pool together a fund to acquire an asset or a portfolio of assets, and crowdfunding uses online investment portals to connect investors to an offering of real estate property investments.
Putting it all together
Real estate investment shows a bright future as it continuously appreciates over time. If you are an investor who doesn't want to manage your investment, choose a type of real estate investment that will earn you passive income, give high returns and diversify your investment portfolio.
Resources: Investopedia, James Chen, February 07, 2022
Harvard Business School, Catherine Cote, September 28, 2021
Forbes, Feras Moussa, Feb 4, 2021
Investopedia, James Chen, February 02, 2022
Rocket Mortgage, Scott Steinberg, February 07, 2022
Millionacres, Kayleigh Kulp, August 03, 2021
Business Insider, Tanza Loudenback and Amena Saad, February 10, 2021,