When it comes to portfolio diversification, it may not be enough to simply invest in different kinds of stocks. Adding real estate to a portfolio provides a decidedly different investment opportunity, with its own unique benefits and drawbacks.
High demand, low supply and ever-increasing prices means it’s difficult to invest in property on one’s own. addy, however, breaks down these barriers though to let the average investor get in on the real estate action. We’ll take a look at how real estate diversifies a portfolio and the ways in which addy makes investing easy and accessible.
Investing in real estate
The basic principle behind diversification is that by making sure your investments are different and varied, you can better withstand volatility, market fluctuations and other potential setbacks.
Most people invest in stocks for a variety of reasons: stocks are liquid and many platforms make it easy for the average person to buy and sell an amount they’re comfortable with. You can invest in stocks in the short term or the long term depending on your goals and risk appetite. Investing in real estate is significantly different.
Property investments offer a chance for a steady flow of money into your bank account, most often by rental income. This is known as passive income. Even if you aren’t renting out the space to residential or commercial tenants, property value generally increases over time, in part because land is finite and as supply decreases, demand increases.
Compared to stocks and cryptocurrency, real estate investments are generally the safest and most stable.
It’s not enough to understand the benefits of a particular asset class when it comes to diversifying your portfolio. It’s also important to identify potential problems so that risk is spread out as well. There are drawbacks to investing in real estate, but they are quite different from the issues that face stocks.
With real estate investing, your money is likely going to be tied up for some time; property isn’t as liquid as stocks. It takes a fair amount of time and energy to buy property, too, much of which comes in the form of due diligence.
Depending on the property, you may need to deal with problematic tenants or find tenants in the case of vacancy. In most cases too, you’ll have to spend resources on maintenance and management. Setting goals, making plans and staying diversified are key to avoiding common real estate investing mistakes.
addy and commercial real estate
addy aims to remove the barriers to real estate investing while mitigating the risks. To start, the high price threshold is gone as addy crowdfunds commercial real estate properties. Members can take part in fractional ownership by investing anywhere from $1 to $1,500 towards a single property.
What’s more, members don’t need to tend to any managerial duties; that’s on the General Partner.
Investments with addy are still illiquid, so once members invest, they can’t take out their money as they desire until a distribution or exit. However, a detailed plan is put in place for each property, so every member has an idea as to when potential returns will take place. With some opportunities, like that of a Montreal smart hotel, there is only an estimated two-year term. With other investments, the term may forecast to be 12 years. Elsewhere still, a property like our affordable housing development in Hamilton may have no end date in sight with distributions expected in perpetuity.
Invest with addy
addy’s crowdfunding platform allows portfolio diversification, a chance at passive income and a means to get into property ownership. Only members can invest, so join the platform today to check out exciting commercial real estate properties across Canada.