With the 4th of July right around the corner, we thought now was a great time to celebrate America’s favorite asset class—Real Estate!
For the fourth consecutive year, a Gallup survey found that one-third of Americans say real estate is the best choice for long-term investment, beating out stocks and mutual funds.
The figure comes not long after another Gallup survey showed that investors are cautious about stocks. In 2007, right before the financial crisis, about two-thirds of Americans were invested in the stock market. That figure dropped to about 50 percent by 2016.
And there is a reason for this, which is exactly what Upside Avenue explains in its recently-launched whitepaper, Investing for Cash Flow.
The paper, which can be downloaded here, states that in an ideal situation, the landlord charges enough rent from tenants to cover the mortgage, taxes, and maintenance of the property. The remaining cash can provide the investor with an entirely new income stream – if all goes well, this cash flow can serve as protection against dips in the financial markets.
But, while additional cash flow exists in stock market investing, it is becoming less common. Some companies will offer dividends as a way to assure shareholders of their financial standing. However, fewer and fewer industries in the U.S. today offer regular and significant dividends. Additionally, these payouts are also exposed to volatility – one of the biggest risks of the stock market.
The white paper also places a special spotlight on the multifamily market, which is famous for outperforming the stock market during the recession. For clarification, the multifamily sector includes properties with more than one rentable unit, such as apartment complexes.
One of the biggest reasons for this sector’s popularity is for its built-in diversification.
When a tenant moves out of a single-family property, that home becomes 100 percent vacant. Whilst with a 100-unit property, a tenant leaving would only make it 1 percent vacant, thereby diversifying the overall risk of the investment. This diversification can provide additional protection in the event of a downturn or other factors outside of an owner’s control.
All of this might be the reason why real estate has been dubbed the best performing asset class over the past 20 years by the National Association of Real Estate Investment Trust Index, beating out stocks, bonds, diversified portfolios, commodities, and cash.
To learn more about diversifying your portfolio into private market real estate, start here.