However, real estate investment is simply the purchase of a future income stream from property and quite undeserving of the tarnish to its reputation. Here are some of the key reasons to invest in real estate.
Competitive Risk-Adjusted Returns
Critics would argue that the low volatility characteristic of real estate is the result of infrequent real estate transactions.
High Tangible Asset Value
Which are listed real estate securities, often have regulations that mandate a minimum percentage of profits be paid out as dividends.
Attractive and Stable Income Return
A key feature of real estate investment is the significant proportion of total return, accruing from rental income over the long term.
Portfolio Diversification
Another benefit of investing in real estate is its diversification potential. Real estate has a low, and in some cases, negative, correlation with other major asset classes.
Inflation Hedging
Therefore, real estate tends to maintain the purchasing power of capital, by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.
The Drawback: Illiquidity
That said, advances in financial innovation have presented a solution to the issue of illiquidity, in the form of listed REITs and real estate companies.
The Bottom Line
On its own, real estate offers competitive risk-adjusted returns, with less principal-agent conflict and attractive income streams.
Competitive Risk-Adjusted Returns
Critics would argue that the low volatility characteristic of real estate is the result of infrequent real estate transactions.
High Tangible Asset Value
Which are listed real estate securities, often have regulations that mandate a minimum percentage of profits be paid out as dividends.
Attractive and Stable Income Return
A key feature of real estate investment is the significant proportion of total return, accruing from rental income over the long term.
Portfolio Diversification
Another benefit of investing in real estate is its diversification potential. Real estate has a low, and in some cases, negative, correlation with other major asset classes.
Inflation Hedging
Therefore, real estate tends to maintain the purchasing power of capital, by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.
The Drawback: Illiquidity
That said, advances in financial innovation have presented a solution to the issue of illiquidity, in the form of listed REITs and real estate companies.
The Bottom Line
On its own, real estate offers competitive risk-adjusted returns, with less principal-agent conflict and attractive income streams.
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that was really great
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