![\"advantages-and-disadvantages\"](\"https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg\")
<\/a><\/p>\nDiversification Value – Real estate returns have relatively low correlations with other asset classes, which adds to the diversification of your portfolio.<\/p>\n
Yield Enhancement – As part of a portfolio, real estate allows you to achieve higher returns for a given level of portfolio risk. Similarly, by adding real estate to a portfolio you could maintain your portfolio returns while decreasing risk.<\/p>\n
Inflation Hedge – Real estate returns are directly linked to the rents that are received from tenants. Some leases contain provisions for rent increases to be indexed to inflation. In other cases, rental rates are increased whenever a lease term expires and the tenant is renewed.<\/p>\n
Ability to Influence Performance – Real estate is a tangible asset. As a result, an investor can do things to a property to increase its value or improve its performance. An investor has a greater degree of control over the performance of a real estate investment than other types of investments.<\/p>\n
Real estate also has some characteristics that require special consideration when making an investment decision:<\/p>\n
Costly to Buy, Sell and Operate – For transactions in the private real estate market, transaction costs are significant when compared to other investment classes.<\/p>\n
Requires Management – With some exceptions, real estate requires ongoing management at two levels. First, you require property management to deal with the day-to-day operation of the property. Second, you need strategic management of the property to consider the longer term market position of the investment.<\/p>\n
Difficult to Acquire – It can be a challenge to build a meaningful, diversified real estate portfolio. Purchases need to be made in a variety of geographical locations and across asset classes, which can be out of reach for many investors.<\/p>\n
Cyclical (Leasing Market) – Not unlike other asset classes, real estate is cyclical. The leasing market consists of the market for space in real estate properties. As with most markets, conditions of the leasing market are dictated by the supply side, which is the amount of space available (or, vacancies), and the demand side, which is the amount of space required by tenants.<\/p>\n
Cyclical (Investment Market) – On the demand side of the investment market are investors who have capital to invest in real estate. The supply side consists of properties that are brought to market by their owners. If the supply of capital seeking real estate investments is plentiful, then property prices increase. As prices increase, additional properties are brought to market to meet demand.<\/p>\n
Although timing the market is not advisable, you should be aware of the stage of the market when you are making your purchase and consider how the property will perform as it moves through the cycles.<\/p>\n
Performance Measurement – In the private market there is no high quality benchmark to which you can compare your portfolio results. Similarly, it is difficult to measure risk relative to the market. Risk and return are easy to determine in the stock market but measuring real estate performance is much more challenging.<\/p>\n
Ian Woychuk, CFA, Investopedia<\/p>\n","protected":false},"excerpt":{"rendered":"
Real estate is usually held as part of a larger portfolio, and is generally considered an alternative investment class. Real estate fits well as part of a portfolio because it has several qualities that can enhance the return of a larger portfolio, or reduce portfolio risk at the same level of return. Some of the …<\/p>\n
Advantages & Disadvantages of Real Estate Investing<\/span> Read More »<\/a><\/p>\n","protected":false},"author":17,"featured_media":3770,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"","footnotes":""},"categories":[13],"tags":[],"uagb_featured_image_src":{"full":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg",857,1000,false],"thumbnail":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages-80x80.jpg",80,80,true],"medium":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages-257x300.jpg",257,300,true],"medium_large":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg",768,896,false],"large":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg",857,1000,false],"1536x1536":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg",857,1000,false],"2048x2048":["https:\/\/www.propertyempire.com.my\/blog\/wp-content\/uploads\/2015\/04\/advantages-and-disadvantages.jpg",857,1000,false]},"uagb_author_info":{"display_name":"Admin Property Empire","author_link":"https:\/\/www.propertyempire.com.my\/blog\/author\/admin-2\/"},"uagb_comment_info":0,"uagb_excerpt":"Real estate is usually held as part of a larger portfolio, and is generally considered an alternative investment class. Real estate fits well as part of a portfolio because it has several qualities that can enhance the return of a larger portfolio, or reduce portfolio risk at the same level of return. Some of the…","_links":{"self":[{"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/posts\/3769"}],"collection":[{"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/comments?post=3769"}],"version-history":[{"count":1,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/posts\/3769\/revisions"}],"predecessor-version":[{"id":3771,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/posts\/3769\/revisions\/3771"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/media\/3770"}],"wp:attachment":[{"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/media?parent=3769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/categories?post=3769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.propertyempire.com.my\/blog\/wp-json\/wp\/v2\/tags?post=3769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}