Who’s buying real estate?
The short answer is many people. Real Estate has always been a rock-solid way to create wealth. Examples abound of ultra-rich and comfortably wealthy people that have made their fortune in real estate. To the everyday busy professional, managing a career and climbing the corporate ladder, or running a small business, this has been a somewhat opaque path. The truth is the wealthy do have access to deals that most other people don’t because they can meet the high minimum bar of these investments, including syndicates, portfolios, large buildings and niche real estate funds. So, many of the rest have had to put all their eggs in the stock market. Others have been more dogged about real estate investing and have found a way to do it.
Where to invest?
The age-old mantra of real estate has always been the triple dictum of location, location, location. But what if you don’t have a full view of all the right locations? Then your options are to invest in locations that you can see, or not invest in real estate at all. Most real estate investors have chosen the former path by investing in their own back yard. Why? Because this is all they can see and can easily do their due diligence. This is their perceived way to reduce risk. In the stock market, that strategy would be tantamount to living in Atlanta as a necessary condition to buy Coke stock. Often these investors already own their primary residence near that same location, which means they achieve no real diversification and often end up investing in high price areas where the yields are very limited. In these cases, their entire real estate portfolio is dependent on that single proximate economy. Any financial advisor worth his or her salt would dissuade you from pursuing such a strategy in the market. Diversification of risk and a portfolio to fit your budget are key starting points for wealth management.
The world has changed
Today, investors don’t need to restrict themselves to their own back yards. There are better places to invest, where their dollar can go further and be more diversified. Companies such as HomeUnion are providing rich data on markets with the best yield, growth or a combination of both. Intelligent engines take investor preferences and budgets and build real estate portfolios that match them. Investors can automatically allocate different properties to their portfolios, much like their stock market investments. In addition, there are on-the-ground services like due diligence, renovation and management that limit risk in remote investing and make this a one-stop shop experience. Newer technologies provide complete online visibility of the investments and a full performance history. Whether investors choose to use all the services or not they now have data that calibrates risk with return to help them to invest in the best assets in the best locations, locations and locations. The triple dictum is alive and well, once again.