Most people invest in whatever their friends or advisors recommend to them, which more often than not means their portfolio consists of stocks and bonds. Some of this could be due to ignorance, but most of it stems from the fact that your advisor won’t get compensated by pushing you towards real estate investments, in less there in the form of real estate related ETF’s or publicly traded REIT’s. While stocks and bonds should be a component of your investment strategy, it shouldn’t end there, you really need to add real estate to the mix.
There are many reasons to have real estate as part of your investment portfolio, one of which is the fact that real estate has been steadily climbing in value since 1967, it’s also one of the few investments that produces income from rents and also appreciates with time. Mark Twain is credited with telling people to invest in real estate because it’s a scarce resource that we can’t produce more of.
“buy land, they’re not making it anymore” -Mark Twain
Land is not only a scarce resource that we can’t produce more of, it also happens to be useful in providing residential, multi-family, and commercial purposes. The bottom line is that land regardless of what the economy is doing, will always have value, it will always be needed. We unfortunately can’t say the same thing about corporations which come and go based on disruption and creative destruction.
Before you dump all of your money into cryptocurrency or the stock market here are the five reasons you should make real estate a part of your portfolio.
Real estate is the best investment in a bear market
The stock market bull run can’t last forever and everyone deep down knows this to be true, but pulling away when the numbers move up every day is challenging to do. This doesn’t mean you need to pull all of your money out of the market, you should keep some money invested in companies you believe have great long-term potential. When the market dips, you can hold until it pops back up again, and in the mean time you can have better returns in real estate.
All we need is two straight quarters of negative growth to send the stock market tumbling down from its record high. According to a recent Reuters poll, economists believe there is a 1 in 3 chance that the US will go through a recession in the next two years. Part of this belief stems from the fact that the fiscal stimulus starts to fade sometime in 2020.
Real estate investing will give you two advantages in a bear market. The first is appreciation– the value of your property can continue to grow even if the stock market isn’t, there is no correlation between the two. Second, even if your real estate investment isn’t growing as fast as you want it to, you can still be collecting rental income from your tenants.
“Real estate exhibits low correlation with public markets and due to its fundamental value, is uniquely positioned to weather downturns” -Omer Amsel,
Lack of Supply of Homes
When the demand for homes is much higher than the supply, you have rising home values. The reality is that construction can’t pace the new demand for homeownership, there continues to be a low supply despite recent construction.
This might surprise you, but it’s been 10 years since the housing crisis where the opposite problem occurred, we had to many homes and not enough buyers. There are now fewer homes per family than any other recorded time in U.S. history, and it’s driving home values up fast.
While this trend won’t last forever, it does indicate a healthy economy and that people continually want to own a home in the US market. Economists are forecasting housing to rise 4.3 % next year and 3.6 % in 2020.
Cross-border real estate investing through Tokenization
Tokenization isn’t a new concept, it’s been going on for thousands of years in cultures all over the world. Throughout history we have seen Beads, precious metals, Cowrie Shells, and now blockchain technology as a token of exchange. Tokens create accessibility and simplicity when trading value for value. It’s a mutually trusted medium of exchange that can be traded easily among its traders. Tokenization opens up opportunities for real estate investors all over the world; the typical barriers that hindered them from investing in U.S. real estate in the past have been removed thanks to companies like RealtyReturns.
In this new age of digital tokenization transactions are much more liquid and secure. Because tokenized real estate is contained in the blockchain each hash contains all the vital information (including history of rental income) needed to make a decision on a transaction; this makes real estate investing more transparent and secure with no need for expensive third parties in the deal.
The significance of digital tokenization can’t be overstated; it’s simply transformational because of its unique ability to divide assets into bite size pieces. The ability to take an asset and divide it up into smaller individual parts that can be traded in the blockchain creates efficiency, greater utilization, and income streams to people that were denied access in the past. The second significant breakthrough that makes blockchain tokens unique as a medium of exchange is the security and ERC-20 compliance embedded in each token.
Investors around the globe that have ETH cryptocurrency will be able to invest as little as 2 ETH into fractionalized US real estate through the RealtyReturnsonline marketplace, and bypass the working with banks, attorneys, brokers, title insurance companies, and escrow.