Including Real Estate in Your Investment Strategy


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Designing an investment portfolio that fits your needs is always a complex process. r Unfortunately, many people neglect real estate as one of the most attractive ways to r diversify their investments because they aren't aware of the variety of ways real estate r can be included. In the past twenty years, the real estate market has exploded and the r opportunities to invest in it either directly or indirectly have grown to keep pace.

Individual investors should always consult a professional if they want to design a r portfolio that properly balances the opportunity for greater gains against possible risks. r This will vary depending on where you are in life, what your retirement plans are and a r host of other factors, but a few simple things should be kept in mind.

* Diversifying is always essential to designing a good investment portfolio. r That is, you should never have more than a third of your investments tied r up in any one form.

* Learn as much as you can about the individual categories and the risks r involved with each. Generally speaking, stocks and bonds are somewhat r safer, but show a slower return, although it does tend to be steady. r Commodities (precious metals, oil, natural gas, etc. ) are riskier but with a r great return.

* Keep in mind that mutual funds can provide you with the power of group r purchasing when investing while spreading the risk over a larger group of r investors.

* Don't forget real estate as a solid investment choice.

Real estate is often neglected when designing a portfolio unless the individual is r purchasing property himself. Actually, the best way to invest in real estate is often r through what is called a Real Estate Investment Trust, or REIT. This is an entity set up r specifically to invest in large properties such as hotels, high rise properties and malls. r The three categories of REIT's are:

1. Equity REITs - These will actually own property which makes money from the r rent being paid by tenants. The investors get a portion of the rents received.

2. Mortgage REITs - These are organizations that write mortgages to real estate r developers or invest in mortgage-secured financials.

3. Hybrids - Simply an organization that invests in both mortgage and equity REITs.

You can also invest directly in real property without becoming a part of an REIT. After r all, the need for real estate will never go away, and land generally increases in value over r the long term, so it's a relatively good investment strategy, particularly if you are r planning a long-term portfolio. It's a low-risk strategy that historically has shown to be r quite profitable in most cases (nothing is risk free).

When adding real estate to your investment portfolio, be sure to do the research and r legwork to educate yourself. Study the market in your area, learn all you can about any r property you are considering and decide whether becoming a landlord or flipping r properties will be more lucrative in the long term. It's important to know if you have r enough available cash flow to be able to keep your property until it's value has reached r the point where selling makes the most sense. To include real property in your portfolio, r you need to periodically check the market and make sure the property is working for you r in the most profitable way possible.

To read more about real estate investment information, visit Jill Kane's sites at


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