Real estate continues to prove it is one of the strongest asset classes. It’s a financial life saver in turbulent times and a fantastic wealth builder in bullish periods.
Yet, contrary to most of the sales pitches and advertisements for real estate investing out there, there isn’t just one magical strategy you should rely one. There isn’t just ‘the one.” In fact, when you hear that, it should be a big red flag.
Sophisticated investors know that consistency in investment and portfolio performance requires diversification. Even the best investment picking magicians don’t get it right a very high percentage of times when it comes down to perfectly timing acquisitions and dispositions in the market. Instead, investors should be looking to diversify deep and broad within real estate.
Here are three types of real estate assets which savvy investors should have in their portfolios for the best short and long term results.
Rentals are a critical part of every serious portfolio. If you look at the portfolios of American billionaires and ultra wealthy families throughout this country’s history and abroad, it is developing empires of buy and hold properties which have often made and kept them wealthy. That’s been true since the days of feuding monarchies, and still with many of the biggest corporations and tech companies.
Rentals provide cash flow and income. Whether it is a portfolio of single family homes, multifamily apartment complexes or even commercial properties, these assets turn in the income when other sources of cash falter.
Over the long term they have continually proven to be best for preserving and growing wealth as well.
Whether it is opportunistic buys, acquiring distressed assets, repositioning or to make value add improvements, this strategy helps provide lump sums of cash and capital. It is about shorter term and/or large gains, that can either add wealth to be multiplied in other strategies or can fill in gaps in cash flow in other parts of your portfolio. Such as in extreme moments of rent freezes and eviction bans.
Debt has long been the go to investment strategy for sophisticated investors. It is an efficient way to invest, requires low levels of management, and can provide multiple exit strategies.
Mortgage notes are an asset which can produce ongoing cash flow, or which can be flipped for lump sum payouts, or even a combination of both. Some also use it as a back door for acquiring the physical real estate collateral at great discounts. Sooner or later the debt gets paid, and there is a lot investors can do to add value to their note investments as well.
Breaking it down further, investors can diversify between both performing and non-performing notes to balance risk and yields too.
Do you have all of these assets in your portfolio yet?
If not, we’ve got a fund you should check out that combines all of these in one.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund