The best way to mitigate investment risk is still akin to our old saying “never put your eggs in the same basket”. So if you are to invest on something, make sure that yo spread your investments in different directions to give a higher return that what you will gain by doing the usual investment that you are already in. To add value to your products, diversification is needed, and to balance the risk and rewards of your enterprising business, you need to allocate your assets.
Therefore, since real estate is a share of a well-diversified portfolio, most investors get themselves involved in real estate. This is despite the fact that our brick and mortar trade have taken a knocking in recent months- but it is still one of the most robust investment classes, especially in the long term.
You only need to factor in the difference between the risk associated in buying property and the risk of buying company shares or stocks. There is a huge difference in risk between buying company shares and buying real estate, although company shares have marginally higher capital growth. This is how it works. When you want to measure risk, all you need to do is to measure the ‘variation of return’ versus ‘capital growth’ which according to statistic ranges from +40% capital growth a year and -40 % in a week. This means that investing in shares can make you lose money in a short time. In real estate you don’t get that sort of variation in risk, hence it is considered a safer investment.
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Entering into a new commercial enterprise where you have no specialist knowledge covers a greater commitment compared to buying property, because the longer the learning curve takes place, the greater the capital involved. It is easy to get started on a real estate investment. The big time realtors of today started out buying a house to live in and so they saw that the value kept on increasing and the wealth that can be theirs, this is what started them to go into the real estate business.
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Other than that, you can borrow more when using property as security compared to using a share portfolio. So if you have properties you can even support your new business venture from lender who lend up to 90% of the value of your property as security.
This shows that property investment is not only low risk; it is still remarkably a flexible investment. This includes long-term capital growth, positive cash flow, adding value.
Other than that, you also have complete control over it as long as you can keep up the mortgage repayments.
You can even slowly renovate it when you are looking at a long term investment. Nothing to hurry about.