Did you know that most billionaires have sizable real estate portfolios? Many of them don’t initially make their money in stocks but in real estate. These facts might surprise you, but they shouldn’t. After all, it only makes sense that most ultra-wealthy people have large portfolios outside of stocks.
But what about you? How diversified are your investments? Are you investing in things other than stocks and bonds? Have you thought about investing in real estate or alternative asset classes like private equity, precious metals, or commodities like oil or gold?
Keep reading to find out why it’s time for you to think beyond stocks for your investment portfolio and learn how it can make a difference.
Why most people don’t think beyond stocks
Most people don’t think beyond stocks because of a lack of knowledge or simply because they’re intimidated. However, even though real estate investing is much easier than stock investing, it’s also more complex.
For starters, there are multiple types of real estate investments. Let’s look at
Residential rental properties: These are houses that you rent out to tenants who pay you a monthly or yearly stipend in exchange for living there.
Commercial properties: This is where you buy or invest in a property that is a source of income, such as a retail store.
Luxury vacation homes: These are usually second homes that owners rent out when they’re not using them, such as during off-season or vacation times.
All three types can make you money, but they each require unique strategies and knowledge to succeed.
Most importantly, all three come with a lot more overhead than just buying stocks—which means that in order to grow as a real estate investor, you have to commit a lot more time and energy upfront.
Invest in different assets
Because of a general lack of financial literacy and an ever-present fear of risk, most investors don’t expand their portfolios beyond stocks. If your portfolio is based on just one or two asset classes, you’re missing out on opportunities to diversify and protect yourself from risk. For example, most wealthy people own real estate alongside their stock portfolios.
This strategy allows them to benefit from price appreciation in both asset classes while mitigating losses due to declines in one type over another. On the other hand, suppose you aren’t already diversified with other asset classes like bonds and REITs (real estate investment trusts).
In that case, it might be time to start learning about how they work so that you can incorporate them into your portfolio down the road.
Properties as an investment
When people think of investments, they usually think of stocks and bonds. However, you should also consider real estate as an investment if you’re looking for long-term returns. Historically speaking, properties have outperformed other types of assets (such as stocks or treasury
bonds). In addition, investing in real estate provides excellent diversification to your investment portfolio, which is crucial to minimizing risk.
Your non-real estate investments can take a dive in value and still leave your property holdings at a healthy price level (and vice versa).
That’s why it’s important to diversify; it helps spread out your risk! If you decide on a multi-property strategy, even better!
A great way to make money with real estate is to find the property you think will appreciate and buy it. Do your research, find a good deal, then make all of your mortgage payments on time while waiting for your investment to pay off.
If you want to try investing in real estate but aren’t sure where to begin, start by checking out courses on Coursera or other platforms that teach real estate investment strategies.
Then you can look into real estate ETFs or mutual funds and get familiar with standard terms like cap rate and cash flow. Once you have an idea of how these work, join groups like the National Association of Investors Corporation (NAIC) or local investors clubs.
What is wholesaling?
Wholesaling is buying a product at a low price with little risk and reselling it at a profit. Businesses that operate on a wholesale model sell products or services to other companies at reduced prices. Most wholesale companies have offices where salespeople sell items out of large storage rooms or warehouses.
A business owner interested in starting a wholesale company must be willing to buy large quantities of goods for resale and pass along savings to customers. However, wholesalers don’t have to mark up their prices by much to make significant profits because they don’t typically spend much on advertising or storefronts.
Getting started with wholesaling
If you’re new to real estate investing, getting overwhelmed is easy. It’s even easier to skip wholesaling because of its unknowns and complications. But if you can learn how to start wholesaling deals successfully, you’ll be well on your way to building a lucrative business that could rival a salaried job.
And don’t worry: Even if real estate isn’t something you know a lot about yet, there are still ways for you to begin teaching yourself in wholesaling without ever making an investment that doesn’t pay off right away.
If you are one of those people, who are just getting started in real estate investing, then finding your first deal can be one of your biggest challenges. After all, we all have limited amounts of time, and most new investors find that they have very little time to spare. Even if you only had an hour a day to dedicate to wholesaling, a considerable amount can still be done within that time frame.
Here are some questions to ask yourself before you take the plunge:
Do you want to buy inventory and sell it immediately? Or do you want to keep the inventory in your home/warehouse indefinitely until someone wants to buy it?
How much research will you have to do before buying items?
Are there any legal issues that need to be taken into account?
To succeed in life and wealth requires both patience and discipline. Sure, you can become a billionaire overnight, but it is not likely. So if becoming wealthy quickly is your goal, then maybe real estate investing isn’t for you.
But don’t forget that these people started with nothing…they started with an idea, worked hard, and became successful. Maybe you have an idea of something to do better than what others are doing now and can be a success just like all of them did. Now, over to you. Are you ready to take action toward your dreams?
Falcon Capital LLC is a private equity firm based in Washington, DC that offers investors the opportunity to achieve financial freedom through dependable passive income from commercial real-estate investments.