Real estate is generally a great investment option. It can be a long-term investment that may be part of your overall strategy to begin building wealth. Experts suggest that 10% to 50% of investor assets should be dedicated to real estate. Another school of thought would suggest about 25%.
Property investment provides balancing and downside protection. Additionally, real estate offers inflation protection, tax benefits, and cash flow. And like any other investment sector, real estate has its pros and cons. It should however be considered for most investment portfolios. Follow the tips below to include real estate in your portfolio.
Ways to invest in real estate
1. Direct Investment
This relates to investors directly purchasing properties as investments. Often, these will include income properties that generate rental income. Direct ownership of property allows for the development and execution of strategy, as well as direct influence over return. The direct investment covers residential, commercial, and industrial.
2. Home Ownership
Many retail investors who have not considered real estate allocations for their investment portfolios may not realize that they are already investing in real estate by owning a home. So, if you own a home, not only do you already have real estate exposure, but this exposure can be termed beneficial. For lots of homeowners, the primary purpose of a home is providing shelter and this is more significant than it sounds at first.
If you are ready to purchase a property, you can take advantage of our 12 years plan, or rent to home option.
3. Real Estate Mutual Funds
They provide investors with a much broader asset selection than can be achieved by buying REIT stocks alone, and they also provide the flexibility of easily moving from one fund to another. Although real estate mutual funds offer liquidity, naysayers believe they cannot compare to direct investment in real estate or homeownership.
4. Real Estate Investment Trusts (REITs)
REIT shares represent private and public equity stock in companies that invest in real estate. REITs typically own and operate real estate properties. These may include retail properties, residential properties, shopping centers, commercial spaces, hotels, and similar properties.
Real estate investment trusts are run by a board of directors and investment experts that makes decisions on behalf of the trust. Investors who don’t have the desire, knowledge, or capital to buy properties can participate via real estate funds (REITs).
A Good Investment
Owning a home has plenty of intangible benefits – Pride of ownership, freedom to customize, family roots, etc. Hence, when you buy a house, you are investing in your future. Think about all the buildings in the world: residential, commercial, industrial…So, real estate has an advantage because of its high demand.
In Kenya, the real estate sector has experienced its share of good performance over the years. It has been contributing between 7.85% and 8.12% of the GDP for the last two years respectively according to the Central Bank of Kenya economic review. The prospect of making a good return on real estate investment in Kenya is almost given. However, the process of buying should include a rigorous due diligence process.
Key Takeaways
Real estate is one of the best ways to make money and build wealth. It can generate an ongoing income source and can rise in value with time. Although retail investors should take into account home ownership when making their portfolio allocations, they may also consider additional, other investments in real estate.
According to a recent report, high net worth investors often allocate not less than 25% of their portfolio to it. This doesn’t mean you should just buy any property. Have a sound strategy and do your homework. For this reason, real estate requires a patient, long-term approach. Lastly, Savvy investors know the truth – adding real estate to your portfolio is a smart decision when you buy from the best property managers in Nairobi.
