Is there a definite answer to this question? I doubt not. Depending on your aim to create an investment portfolio, the answer will always be a different one.
There are certainly many different ways how you could diversify your investments. When you go on to the internet and type “investment portfolio” in the search box and click on “images”, you’ll find a full page of pie charts, each of them depicting a different proportion of how you should diversify them. There is no absolute right or wrong with how you diversify them. The most common investment vehicles on the pie charts are bonds, stocks, commodities, funds, venture capital, cash, etc. But I was surprised to see that many of these graphs do not include real estate. For me, a healthy investment portfolio should be able to create long-term wealth with good cash flow each month, especially for my retirement. Many people who have not started investing in real estate have concerns that are not unfamiliar. Today, we’re going to talk about all your fears (yes, I know all your excuses) and why it is still important to start investing in real estate as early as you can.
Why is it important to include real estate as part of your investment portfolio?
Real estates prices rise in the long term. Go and check the house prices growth of whichever country you’re interested in. You’ll find a strikingly similar pattern – The prices tend to move upward in the long term.
Invest for cash flow. Most people only look for long-term capital growth but forget about the fact that you can make money with property by renting the units out. Don’t underestimate the cash flow you can get each month. If you do it right, the profit you get each month will roll up to become the deposit of your next investment.
25% in real estate guarantees you not to lose out. Since property prices tend to rise, once you’ve done your due diligence and invest in a few properties that would guarantee you nice capital growth and juicy cash flow, you can put your focus on other more high-risk investments where you need to monitor the prices on a daily basis. A good proportion would be to have 25% of your capital invested in property.
Now that we’ve made it clear why it is important to invest in real estate, let’s face the fear (or excuses)! Don’t panic, I’ve got solutions for you 🙂
Top Fear No. 1 - Property has a high entry threshold
Though this is certainly true, only when you compare it with other investment vehicles, or when you only invest in cities with a big name.
How to tackle: Try to check for property prices in second-tier cities or third-tier cities. As long as the property is near to a university or a large hospital, or the city has big employers, you’re on a good lead to finding a property that generates good cash flow but is less pricey.
Top Fear No. 2 - Lack of knowledge
Just like with how you begin with learning about all the other investment vehicles, you’ll first speak with your friends who have had experience and you’ll do massive research before you make your first “bet”. This should be done the same with property. There is hardly anyone who is a born investment genius.
How to tackle: EDUCATION is key. Thanks to Covid, there are ever so many property education academies that offer training online. Do some background checks with the academy and speak to people who’ve gone on the training to make sure that you pay for what you want. Each academy would claim to provide all-around support but most of them just provide online videos with very little in-person support to guide you through. And each mentor has his or her most focused strategy so make sure you choose the right mentor who can give you hands-on experience on your chosen strategy.
Fear No. 3 - If I lose money, that will be BIG money!
Yes, it could be true, if you just purchase a property that you want to live in and ignore all the other important factors that are important in analysing deals. The property that you want to live in doesn’t mean that it could perform well in the chosen area.
How to tackle: Property is not stock. Its value won’t vanish overnight. Don’t forget that real estate is a long-term game. If you hold on to it long enough, you’ll definitely see the fruits. Remember:
“Good things come to those who wait.”