The last few years have been unusual for all of us, with the pandemic and market changes affecting every sector. Whether you are a mid-level or senior-level corporate executive wondering about your next career move or a retiree trying to build a part-time side business, spans like these can be confusing when looking for investment options.
At the end of the day, it is your hard-earned money that you are going to put into stocks, bonds, mutual funds, or real estate to build a new portfolio or strengthen an existing one. But as they say, it is all about the timing when it comes to entering the market. So, how is the market going to be next year? Is investing in real estate worth it?
Though the economy is making a slow recovery from the after-effects of the pandemic, there is a mixed feeling of optimism and caution among investors for the next year, making real estate acquisitions a strong consideration.
As a real estate investor for the last two decades, let me walk you through the pros and cons of investing in real estate compared to other investment options. Investing in real estate can be a safer bet this year with the right knowledge, tools, and resources to back up your investment decisions.
Weighing the Pros and Cons of Other Investment Options
With the federal government introducing fiscal packages into the economy, market confidence has been slowly building. But that has not taken away the volatility in the market fuelled by fears of more coronavirus infections and uncertainty around how the results of the U.S. presidential elections will impact the economy.
Here is how the market outlook this year will affect you as an investor and why investing in real estate can prove to be a wiser decision:
Experts are cautiously optimistic about a positive stock market outlook. Sectors such as IT, healthcare, consumer staples, and communication services are expected to perform well in the new year.
Pro: Tech stocks in the cloud, cybersecurity, and consumer services have witnessed an increased valuation during this pandemic, with the overall sector translating well into a remote working environment during the lockdown. The latest earnings reports shared by tech giants, along with the extension of work-from-home policies by several companies until summer reflect the positive growth of the sector, which will further push the pricing of these stocks.
Con: Experts believe that “U.S. equities are becoming structurally more volatile” and that the advanced appreciation of tech stocks will head towards correction soon. If the valuation of the tech stocks tank, its ripple effect will be felt across the market, affecting your portfolio too.
If you are among the investors with a low-risk appetite, bonds are often considered a safe option to rebalance your portfolio. In an uncertain market, long-term bonds such as treasuries, high-yield, and corporate bonds can offer you decent returns, if not outperform your equity portfolio.
Pro: Experts believe that a 10-year yield will be in the range of 1%-1.25% in the next few quarters. So, holding AAA-rated bonds till maturity can be a good option for your retirement income.
Con: With the current lower interest rates, a 10-year U.S. Treasury bond will offer you a much lower yield for the entire holding period than the returns you can make in the equity market. As the U.S. Federal Reserve tries to minimize the market turbulence, bonds are expected to offer ‘no-return risks’ throughout the year.
You can also create your portfolio through a managed fund that invests in a mix of stocks and bonds. The historic fund performance would be the benchmark to consider here. But with only a few sectors in the equity market performing better currently, it is highly unlikely that you would be able to enjoy those benchmark returns through a sector-specific or industry-specific fund.
Pro: If you are new to the stock market and inexperienced in timing the market’s volatility, mutual funds are your safe bet that offers diversification and portfolio management.
Con: Mutual funds, particularly money-market funds that invest in cash-like securities such as treasury bills, commercial papers, or short-term debt have witnessed a decline in the rates below 1%. This significantly limits your opportunities to make a good return.
Contrary to popular opinion, real estate is not a risk-prone investment during a recession.
Historically, the returns on real estate investment during the recession have been less volatile compared to stocks and bonds. The pandemic has fuelled an ongoing trend among homebuyers who are looking for single-family homes in suburban areas, with more rooms and bigger yard space.
With an expected increase in foreclosure activities next year owing to temporary furloughs and permanent layoffs, there would be a rise in the number of distressed homeowners finding it difficult to pay the mortgage and trying to sell off their properties.
The home-buying spree, coupled with an increase in foreclosure activities provides an opportunity for real estate investors to wholesale or rehab distressed homes and sell them with higher upside potential.
Pro: A projected fall in mortgage rates next year is expected to continue the homebuying spree, with competition among potential buyers fuelling the upside potential of the rehabbed properties.
Con: Without comprehensive real estate training, tools, and network support, you are at risk of making wrong investment decisions.
Comparing these options, it’s still a good time to invest in real estate. Investing in real estate:
- diversifies your portfolio,
- offers less market volatility, and
- provides a solid cash flow.
The trick is to make the right move in the real estate market with comprehensive training, leads, tools, and network support.
Investing in Real Estate is Worth It with the Right Training and Tools
Any time is a good time to start investing in the real estate market. That is what I learned when I joined the independently owned and operated HomeVestors® franchisee network. You don’t need any prior knowledge of the real estate market to make a career move to be your own boss. All you need is access to comprehensive real estate investment training, potential buyers/sellers, tools, and network support to confidently start your career as a real estate investor.
- Comprehensive training: The one-week comprehensive training allows you to learn the ins and outs of real estate investing including buying, rehabbing, and selling distressed properties.
- Potential Buyers/Sellers: The nationally-known and trusted “We Buy Ugly Houses® ” ads help you connect directly to leads—the distressed homeowners who are caught in “ugly situations” and want to sell their properties quickly.
- Tools: As a part of the HomeVestors® franchisee network, you get access to proprietary tools such as:
- UGVilleSM , a platform to connect with hard money lenders;
- ValueChekTM, a property valuation app;
- DealVestors® , a streamlined listing portal to help wholesale properties; and,
- An end-to-end lead pipeline management and conversion tool.
- Network support: The personal mentorship of a Development Agent is your key to making informed decisions regarding real estate investments. A seasoned investor guides you through selecting the right properties, evaluating them, and choosing the right exit strategies that can make a big difference, especially in uncertain times.
With access to these benefits, your journey as a real estate investor can be worth every bit and more for years ahead. To learn more about how you can weather the current market volatility and ace it as a real estate investor, request information today!
Each franchise office is independently owned and operated.