Benefits of Real Estate Investment
Economic studies highlight the potential benefits and advantages of real estate investments compared to other investment options such as stocks. One of the primary benefits of real estate investment is the relative safety compared to some alternatives. While the stock market is known to be volatile, real estate is typically not as volatile and offers higher returns per unit of risk. This makes it an appealing option for risk-averse investors, especially those who are new to real estate investing and have limited capital. Another benefit is that real estate is a tangible asset. While stocks offer liquidity, the value of a physical asset like real estate tends to hold up better over time.
Real estate investments generally appreciate over time, averaging around 5% annual appreciation for single-family homes from 1987 through 2023. In recent years, appreciation rates have jumped. According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index in April 2024, the national average annual gain was recorded at 6.4%. Certain states like Vermont and Rhode Island have seen astounding increases as of Q3 of 2023, which rose to over 13%.
As properties increase in value, investors can benefit from significant profits when they sell. Investors also have the option to utilize a 1031 Exchange for appreciated properties and exchange into higher-quality properties, continuously enhancing the value of their portfolios.
Diversification is another key advantage of real estate investment. By including real estate in their portfolios, investors can spread their risk beyond the stock market. This diversification means that if one investment underperforms, not all the investor’s money is compromised, thereby providing a more reliable return on investment (ROI).
Investing in real estate can be a powerful tool for building generational wealth. Properties can be passed down through generations, allowing families to accumulate and preserve wealth over time. For property inherited by heirs, https://www.accruit.com/blog/options-inherited-property-including-1031-… tax consequences and planning options need to be considered.
Real Estate Investment Strategies
Fractional Ownership of Real Estate: TICs and Triple Net Leases (NNN)
Fractional ownership is an investment structure that allows multiple investors to purchase a percentage ownership in an investment-grade asset. Fractional real estate ownership and other alternative investments provide for diversification, and financial advisors will often dedicate 10% of a clients’ portfolio towards such vehicles.
Tenant-In-Common
A Delaware Statutory Trust (DST) is a legal entity that holds title to real estate assets. A DST offers investors fractional ownership of larger and higher quality properties that they otherwise would not be able to individually purchase. A DST is also an option for those wanting passive ownership, as there are no daily management responsibilities. This investment option also offers diversification in allowing multiple property investment within a single investment. By investing in multiple properties, some of the risk connected to a single property investment can be mitigated.
Real Estate Investment Trust (REIT)
A Real Estate Investment Trust, or
Real Estate: A Versatile Investment Strategy for All
