Private Real Estate – How It Can Benefit A Diversified Portfolio? | Worth CRE

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Private Real Estate – How It Can Benefit A Diversified Portfolio?

 

A diverse investment portfolio is recommended to help investors keep their portfolios balanced, despite the ups and downs that come with financial investments. Private real estate, despite any negative connotations that are sometimes associated with it, can provide that balance. As most commercial property realtors can attest, real estate behaves differently in terms of value than most stocks and bonds. Due to this difference in behavior, real estate is still a worthy addition to a well-rounded investment portfolio, even when it is experiencing a downside.

Real Estate Behaves Differently than Stocks

The most prevalent and positive difference that investors usually note when comparing private real estate to stocks and bonds is how values seem to work opposite of each other. Many criticize investment in real estate as there are times when values are lower when other stocks are doing well. It is the flip side that must be recognized to understand the true value of private real estate. Historically, as stocks and bonds are losing value in a bad economy, real estate values are climbing. This is largely due to the fact that many stock investments are non-essentials, while housing and private real estate can be considered essentials.

Real Estate As A Long-Term Investment

One of the essential points that commercial property realtors say investors should understand about real estate as a profitable investment opportunity is that it is a long-term investment and is valued in a different way than stocks. Real estate is appraised based on local market conditions, uniqueness, demand, and other factors; stocks and bonds are valued only by the worth the stock market assigns to them at a particular time. This type of valuation with real estate follows employment and location markets more than it follows stock markets, giving it a major advantage at times when stocks may not be doing so well. Real estate is also a long-term investment opportunity, which gains in value and pays higher returns the longer it is owned.

Once again, it is possible to see how real estate reacts completely opposite to the stock market. When the economy is at its worst, private real estate becomes more desirable as income-producing property because of the effects caused by the sluggish economy. This effect increases the value of real estate, while stocks and bonds are quickly decreasing in value. It is an investment with a lower risk that typically delivers higher returns over time due to that lower risk, as opposed to most other investment opportunities.

Real Estate Provides An Important Balance

Diversity is important to an investment portfolio to keep it growing. Just like experienced stock investors recommend investing in multiple stocks to have a rounded portfolio, commercial property realtors who work with investors suggest ways that private real estate can add to that portfolio. As explained above, real estate’s opposite behavior to that of stocks and bonds helps ensure that during times when conventional investments are performing poorly, an investment in real estate will perform well. If the goal is to collect investments that can perform when others may not, investing in real estate can provide that balance for those who understand how this type of investment can be expected to behave.

Real estate offers great investment opportunities in many markets; it is a great way for any investor to diversify their financial portfolio. Due to the way in which private real estate is valued and how that value increases when most other investments are losing value, commercial property realtors highly recommend adding private real estate to an investment portfolio!

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