How To Diversify With Investment Real Estate
But how do you diversify if most of your holdings are stocks? One popular option is to invest in real estate. That doesn't mean your personal residence. Although your home may appreciate over time, and if you profit when you finally sell it some or all of your gain may be exempt from taxes, it is better not to think of it as an investment. But other kinds of properties can help you diversify your portfolio.
Typically, real estate values don't move in synch with stocks and bonds. And whereas those financial assets may serve as "leading indicators," helping predict the way the economy is going, real estate values often increase and fall after, not before, other economic trends. Also, the market for real estate can vary significantly based on geography and other factors. When the market in one part of the country is hot, another could be ice cold.
1. Be a landlord. You might own an apartment building or a home in a resort area. Once you've made the down payment to purchase a property, you'll have both regular expenses—including property taxes and mortgage interest—and rental income. The goal, of course, is for your income to be greater than your expenses.
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