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Staying Realistic: Real Estate Investment in the Long Term

In any long-term investment, the investor always needs to keep one thing in mind— sometimes things happen. That may sound trite, but it is perhaps the most salient point in any long-term strategy. It’s also one of the most difficult things for investors of all stripes to accept, at times, including the most experienced. When it comes to real estate investment, the relevance of this core principle is doubly important. 

What does it mean to say that sometimes “things happen”? It means that, as with any long-term investment, you will need to sustain some unexpected events and downturns. Sometimes those occur on a local scale— a shift in the jobs market or population growth in your region. In other scenarios (as we are witnessing now) the shift happens on a much larger and more impactful scale, affecting the economy across multiple sectors. 

In either scenario, however, the principle holds. Long-term investing means accepting that things happen and remaining confident in your long-term plan. 

The Viability of Real Estate in the Long Term

Real estate investment remains a significant part of most balanced portfolios. According to a national survey run in 2016, 96 percent of investors in the U.S. who had invested in real estate believed it had resulted in financial success. Fifty-one percent of those credited real estate investment with creating long-term net worth, while 52 percent stated that such investments had given them greater overall financial stability.

In other words, the confidence is there, and real estate investment has demonstrated its value as a key component of investment portfolios time and again. 

Staying Calm in the Face of Economic Indicators

Of course, in the face of any economic crisis, let alone one on the scale of COVID, investors can feel queasy. As economic indicators look grim, many an investor can get cold feet. 

From one perspective, it’s important to take some indicators with a grain of salt when it comes to real estate. Unemployment rates, for example, are significant but can lag, rather than serve as a future indicator. In the context of real estate, looking to regional or metropolitan growth in job numbers is a far better future indicator, demonstrating a new influx of qualified purchasers into your market area. 

Even before COVID-19, too, it’s important to consider that the US housing market was already on track to slow down. As for the overall US economy, it was expected to slow, as well— according to the Fed, projected GDP rates for 2020 were just 2 percent and 1.8 percent for 2021. 

Any investment for a portfolio, when made with the right advice, would have been made with this in mind and retrofitted to sustain slowdowns and downturns. 

Preparing for the Long Haul

As a property owner, you are able to recession-proof your investment with the right forethought and planning. When prepared, you are able to face the things that might come up in property management and maintenance. 

For one, it’s important to understand that, if you have not considered renting, you should consider renting in the future, as a way to sustain the viability of your investment in the long term. 

Choosing the right property manager in such cases, too, is critical. Do you communicate well? Is your property manager, if not entirely privy to, at least aware of your overall goals for your investment property?

Getting trigger happy in the face of a downturn puts your investments at risk. It is only over a longer period of time that you can see the full effect of a healthy portfolio. If you jump in and expect things to happen right away or go smoothly all the time, you might not be facing reality.

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