More women should be investing in real estate. Real estate investing is one of the best ways to build wealth, and there are so many ways you can go about doing it. You can invest in a house on the Florida Panhandle that you’ll use as a short-term rental, buy a multi-family property near your own home as a long-term rental, or even invest in something like a REIT, which is somewhat like a mutual fund for real estate.
No matter how you do it, it’s an important part of a larger investment strategy for women, and the following are key reasons you should think about adding property or real estate to your portfolio as soon as you can.
1. It Can Positively Affect Your Personal Finances
Investing in property and real estate can have a hugely positive effect on your overall finances. This is true for men, too, of course, but women are not historically as likely to invest in property, so it can be useful to point out these benefits specifically for them.
If you can build a solid investment portfolio that includes a healthy share of real estate, you may be able to eventually support your lifestyle fully from it.
When you invest in property, you may be able to reach a goal of financial independence faster. You can increase your current income even in the short term, and ultimately you might be able to replace your job.
If you’re able to have more flexibility in how you earn an income, then you might be able to have the same flexibility in other parts of your life. For example, maybe you can spend more time raising your family if you don’t have to work in a traditional setting, and that’s what you’d like to do.
2. Long-Term Security
Women are increasingly looking for ways to can cultivate and maintain a sense of long-term financial security, which real estate investing can help them do.
You can create a steady cash flow, and then you also have that peace of mind of knowing that the property’s value is very likely to go up or appreciate over time. There’s no guarantee, but we can look at trends and see that real estate does tend to be one of the most secure investments you can make.
Real estate isn’t a short-term investment. Instead, the appreciation of your capital assets, or your property, over time, is really what you want to look at.
3. Protection Against Inflation
We’re dealing with record-breaking inflation levels right now, so it’s something that’s at the forefront of the minds of a lot of women. When you invest in real estate, it can serve as a hedge or protection against inflation.
When the inflationary environment is high, you have control over your investment strategies. You can decide, for example, how much rental income you’re going to charge per month, so you can make sure that it’s going up along with inflation.
Your property values will also likely go up when inflation is high. As the cost of living goes up, your cash flow can too.
4. Your Skills May Be Well-Suited to Real Estate
As a woman, you may not realize that you already have a strong skillset you could apply toward being an investor. You might be good at organizing, which is an important part of investing in real estate and especially if you’re going to rent it out. You could be a good negotiator and a strong communicator as well.
Women also tend to be good at establishing relationships, so if you want long-term tenants you can trust, this skill will come in handy.
So much of real estate is about relationship-building.
Leverage is a way to use borrowed capital, or debt, to increase the potential return of your investment. Leverage is something that individuals and companies use to expand their returns but also simultaneously expand their downside risk.
The simplest way to access leverage is through the use of your own funds. With a mortgage, when you make a 20% down payment, you get 100% of the house. You may even be able to put less down.
If you were to put 20% down on a $500,000 property, that would be $100,000. Then, you borrow the rest. In doing so, you’re using a small percentage of your own money to make a purchase. The majority comes from the lender. If the property appreciates or goes up in value at a rate of 5% a year, then your net worth grew to $525,0000 during that year.
If you made a purchase outright without a loan for a $100,000 property, assuming the same appreciation rate, then your net worth would only go up $5,000 over the 12 months as compared to $25,000 for getting the more expensive property.
Real estate is a tangible asset that you can use as collateral, so financing becomes easily available to you.
A good investment portfolio is one that’s widely diversified. Real estate often has a low or even negative correlation with other asset classes, which is why it’s an important component of investing. What that means is that real estate’s value might go up even when other investment asset classes are going down. You can reduce the volatility of your portfolio when it includes real estate.
7. Building Wealth and Equity
As you pay down the mortgage on a property you buy as an investment, you build equity. Then, as you’re building equity, as mentioned, you have the leverage to buy more properties. That allows you to continue to increase your cash flow and your wealth.
If you’re a woman, you may be hesitant to invest in real estate. Women, in general, tend to be less likely to take significant risks in investing compared to men, but it could be a good time to consider adding property to your portfolio so that you can build long-term, sustainable wealth and have a sense of both flexibility and control.