Three Reasons to Invest in Real Estate

[Tom Napiontek]

With all the market uncertainty across the board these days, individuals are skeptical about investing in just about anything. So, I often find myself face-to-face with a prospective investor who wants to know “why real estate?” I believe real estate is a smart investment with staying power, so I take advantage of the opportunity. I give the following three reasons: 

1. Diversification – Every smart investor knows a portfolio is at its best when diversified. But this doesn’t just mean several different stocks or bonds. It also means adding different asset classes. Real estate presents an interesting opportunity to further diversify a portfolio by adding another class in there that may not already be present, providing additional protection from market fluctuations.
2. Stability – Real estate is one of the most stable investments. While many other asset classes are extremely variable, moving up and down dependent on the market, real estate has greater potential. From the outset of the investment, you can use historical information and a low interest mortgage loan to determine the best rent rate that will provide the monthly profit you desire. Outside of vacancy, if you have a good screening process and can get a reliable payer in place, and you continue to take care of them, you can bank on your income from that property.
3. Risk – Sure, there is risk. Like we all saw beginning around 2008, it’s possible for real estate to severely lose its value, to the point where selling an investment may not happen for a while. But the great thing about real estate is that even when properties aren’t selling, it’s because people are renting. So, you have the potential to continue earning. Real estate is also one of the only investments that are virtually guaranteed to appreciate with time (that is, of course, unless your property is in a highly undesirable area that is declining).

Tom Napiontek is a real estate investment guru and financier from Vancouver, British Columbia.