Real estate is a popular investment option. While many people assume that it is a risky endeavor, it has historically tended to retain value, even in difficult times. Real estate can be a valuable addition to your investment portfolio, especially if you diversify your holdings and choose the right property type for your goals. However, you’ll need to know the ins and outs of how to invest in real estate before deciding to jump in.

One of the most common ways to invest in real estate is to buy physical property and then rent it out. This can be lucrative, but it’s also a highly time-intensive venture. Fielding calls from tenants about overflowing toilets or infestations of ants can be a headache. If you plan to own rental properties, you should save a financial cushion to cover the cost of property management and other expenses during periods when your rentals are unoccupied. Read more

Another way to invest in real estate is through real estate investment trusts (REITs) and online real estate platforms. REITs are securities you can purchase through a brokerage account, similar to stocks or mutual funds. REITs invest in real estate and then pay dividends to investors. These investments are less hands-on than purchasing physical property, but they can still be more volatile than other types of investments. Real estate platforms connect developers with investors who want to take on debt or equity stakes in their projects in exchange for regular payments. These investments can be more illiquid than traditional REITs or even direct ownership of rental properties, but they may provide higher returns than the broader market.

You can also purchase raw land and then sell or lease it to others for agricultural purposes. However, this type of investment can be expensive because you have to wait for the land to appreciate in value and then pay for any improvements that you make. Additionally, you must maintain the land to meet regulatory requirements and protect the environment.

In general, it’s best to focus on the local market when deciding to invest in real estate. The location of your property can make a huge difference in its profitability, so it’s essential to research demographics and economic trends. This information can help you determine whether a particular location is likely to grow and attract renters.

As with any type of investing, you should be aware that real estate is not a guaranteed investment. Prices can fall, and you might not be able to recover the money that you invested in a downturn. Moreover, it’s important to diversify your investments and include other asset classes, such as equities.

Having a well-diversified investment portfolio can help you ride out market volatility and achieve your long-term financial goals. Adding real estate to your portfolio can enhance your return potential and protect you against inflation, but it’s important to carefully consider the risks and benefits before making any decisions. Your trusted advisors, such as a wealth manager or a broker, can assist you with this process by offering expert advice and guidance.