5 Reasons Why You Should Diversify Your Portfolio With Real Estate

5 Reasons Why You Should Diversify Your Portfolio With Real Estate

As central banks increase interest rates to levels well above the five-year average, a global recession in 2023 seems ever more imminent. If this happens, share prices are sure to plummet. 

As a savvy investor, you know you need some protection from the uncertainties offered by the stock market. Here's why investing in real estate is a great way to diversify your portfolio and reduce risk.

1. Property Is Immune to Wall Street Fluctuations

If you have money invested in stocks, you'll know that a drop in prices in one area often has a domino effect.

Real estate prices are rarely impacted by stock market fluctuations. This way, adding properties to your investment portfolio helps reduce your overall risk.

Real estate helps lessen the overall impact on your portfolio when your stocks experience declining values.

Since real estate prices rarely experience dramatic declines, remaining fairly stable from month to month, so they help balance the impact created by more volatile investments. 

2. Real Estate Is a Good Hedge Against Inflation

People will always need roofs over their heads. So, based on the ever-growing population and ongoing housing shortage, you'll always experience demand for your rental properties.

Of all previous recessions, only the Great Recession of 2008 negatively impacted home prices. Even so, houses regained their 2007 values within ten years.

Overall, real estate prices undergo faster, more stable growth than stocks and shares do. 

3. Investment Properties Bring in Passive Income

Provided you hire a property manager, you can earn recurring income from your properties without any extra effort. A property manager will take care of marketing and maintaining your property, taking care of tenants, and collecting the rent.

Both residential and vacation properties bring in regular cash flow that increases according to inflation every year.

At the same time, the value of your rental property increases in line with other homes in the area. 

4. Enjoy Variety When You Diversify Your Portfolio

When you invest in property, you can diversify your portfolio even more by snapping up different types of properties, each adding value in a different way.

You can protect yourself from fluctuations in real estate prices by adding land, commercial property, vacation homes, and residential properties to your portfolio. Then, you can add even more variety by snapping up properties in different locations. 

5. Real Estate Is a Win-Win Investment

Like other investments, you can sell your investment properties at a profit when real estate prices increase in that area. The difference is, you'll earn passive income while you wait for that day.

When investing in property, it's best to research up-and-coming areas where you can buy homes at low prices and sell them for more soon afterward.

Maximize Your Property Portfolio

Buying real estate always pays off when you choose rapidly growing markets with a high demand for rentals. El Paso is one of those areas where a housing inventory shortage is fast turning hopeful homebuyers into renters.  

Are you ready to diversify your portfolio with real estate? Get in touch for the best advice and assistance if you own a potential rental property in El Paso.