Here's the simplest method to begin investing in real estate.

Here's the simplest method to begin investing in real estate.
Here's the simplest method to begin investing in real estate.
  • A recent study by Gallup found that 36% of surveyed Americans ranked real estate as their top long-term investment, above stocks or mutual funds (22%), gold (18%), and savings accounts or certificates of deposits (13%).
  • Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York City, stated that real estate investment trusts (REITs) can be an excellent way to begin investing with a "low barrier to entry."
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Some Americans consider real estate as the best long-term investment. If you share this belief, REITs could be the simplest way to enter the market.

According to a recent survey by Gallup, a global analytics and advisory firm, 36% of surveyed Americans ranked real estate as their top long-term investment, compared to 22% who cited stocks or mutual funds, 18% who chose gold, and 13% who opted for savings accounts or certificates of deposits.

According to the report, only 4% of surveyed adults consider bonds to be a good long-term investment, while only 3% believe the same about cryptocurrency.

The firm polled 1,001 U.S. adults through telephone interviews from April 1-22.

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Real estate investment trusts (REITs) can be an excellent option for those who see long-term investment potential in real estate, as they have a "low barrier to entry," according to Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York City.

A publicly traded REIT invests in income-producing residential or commercial real estate and shares can be bought like stocks or REIT mutual funds or exchange-traded funds. REIT investors earn money through dividend payments.

Francis, a CNBC Financial Advisor Council member, stated that some investments can be made for as little as $25.

'No one gets super emotional about stocks'

Some Americans favor real estate as an investment because it elicits emotions and sentiment, unlike stocks and bonds, according to Francis.

""Real estate, not stocks, elicits strong emotions from people," she stated."

Some people see it as a legacy to give to their children.

"Instead of giving them a portfolio of stocks, I want to give them a physical house they can use," Francis stated as an example.

Investing in real estate and becoming a landlord requires a substantial financial and time commitment, compared to other types of portfolio investments.

"According to CFP Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts, being a landlord involves more than just receiving a monthly payment."

Properly managing, insuring, and servicing a property is necessary after purchasing it for investment purposes.

Taking care of a property can be expensive, Ahmed explained.

Experts suggest that REITs can provide diversification opportunities by exposing investors to hundreds or thousands of different properties or regions.

If you invest in real estate properties like shopping malls, warehouses, and office buildings, you can diversify your portfolio. However, if the region or sector experiences devaluations, the price decline will be reflected in your portfolio.

"If a REIT is investing in shopping malls nationwide and shopping malls are performing poorly, you will feel the impact, as you won't be protected."

How much real estate should be in your portfolio

To truly tap into the real estate market as a long-term investment, "really research these funds," Francis advised.

REITs should not be the only component of your portfolio, advised Francis. Some advisors suggest that REITs should not exceed 25% of your portfolio, she added.

Experts advise that REITs often pay out a significant portion of their profits in the form of dividends, which can be taxed as ordinary income.

Francis said, "It's as if those dividends came to you and your paycheck at work."

If you don't require additional income, consider adding the REIT to a tax-sheltered account, such as an individual retirement account, Ahmed advised.

"Asset location matters," he added.

by Ana Teresa Solá

Investing