Should Real Estate Be Part of My Wealth Management Strategy?

For investors building their portfolios and expanding their wealth management strategy, real estate is one of the most common potential investments. Investors often wonder if that real estate will be a good match for them, and how it will fit into their overall investment plan. We’re going to take a look at how real estate can impact your portfolio, and whether it’s a good idea to add a property to your list of assets.

Should I Invest In Real Estate?

Provided the investment is done properly, with the right property, and with all potential risks carefully calculated, real estate is a great asset to incorporate into your wealth-building plan. There are some caveats, however, which can differ from one investor to another. Overall, real estate can be an incredibly powerful tool.

How Real Estate Can Improve Your Wealth Management Strategy

Provided the real estate investment is positioned intelligently and is the right fit for the risk tolerance and diversification needs of the investor, real estate can be a powerful asset to incorporate into your wealth management strategy.

Real Estate Is Non-Correlated

One of the biggest reasons to incorporate real estate in your investment planning is that it is highly disconnected from the market at large, also known as being non-correlated. This makes real estate a great place to park assets during periods of long-term market volatility.

Real Estate Is A Great Hedge Against Inflation

Inflation is one of the biggest concerns on every investor’s mind right now, and with interest rates climbing higher and higher, unutilized cash can suffer significant inflationary decay while the investor figures out what to do with it. Putting this cash into real estate can help insulate it from inflation, at the price of becoming far more illiquid.

It Can Yield Income For The Investor

While not everyone invests in real estate with the objective of being a “landlord”, investing in the right types of real estate can produce significant monetary yields for the investors. This doesn’t necessarily mean buying a home and renting it out, there are many different ways to incorporate real estate into your portfolio in a way that generates passive income for you.

Real Estate Is Tangible

In a time of increasingly intangible investment assets like stocks, non-fungible tokens, and more, there is a growing benefit to investing in something you can touch. Real estate is a tangible asset, you can touch it, stand on it, or be in it, and that brings significant levels of security and peace of mind to many investors.

Drawbacks To Including Real Estate In Your Wealth Management Strategy

Some potential drawbacks come along with real estate investing, but just like any other investment, once you understand the potential risks you can also plan to minimize them in significant ways. The two biggest drawbacks to buying real property are that there is a significant loss of liquidity and risks associated specifically with real estate.

Limited Liquidity

One of the biggest drawbacks to real estate is that you lose much of the liquidity that your cash had. This means if you want to invest in real estate, you should plan to use cash that you won’t need for some time. While you can eventually sell the property and gain liquidity from those assets again, it can be a lengthy process.

Associated Risk

Another potential downside to real estate is that it does have its own market, and if that market undergoes a correction, you’ll likely need to hold that property until the market recovers and you can realize some level of profit again. For new investors who may only be able to buy a single property, this can be a significant risk that they will need to plan to mitigate.

Wealth Management Strategy: If You’re Ready To Discuss Adding Real Estate To Your Portfolio

Investing should never be taken lightly, and if you think you may be ready to begin investing in real estate, reach out to our team to discuss how best to begin that journey. The professionals at Prevail can help you decide what type of property may be a good fit, and how best to finance the purchase, and can provide insight into the finer points of taxation and resale that may impact your wealth management strategy down the road.

Frequently Asked Questions

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Andrew Stafford

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