- Real estate has carrying costs. It takes effort to find, evaluate and acquire real estate. Then there is a carrying cost of property taxes, insurance and mortgage interest. There are maintenance costs which often require personal involvement. Finally, it takes effort to prepare and sell real estate.
- Real estate is not very liquid. Most property takes a while to sell, unless one sells at a below market price. Even then, it make take several months to finally cash out.
- Real estate generally requires personal attention to manage it, unless it is vacant land.
- Real estate requires a significant commitment of funds that may be tied up for a long period.
- Real estate can provide significant returns and recurring streams of income for the proper investment.
My alternative to actual real estate is to invest in REITs. I get many of the benefits of owning real estate without some of the negatives. REITs are liquid, professionally managed, and allow for lower investments and greater diversification. However, REITs probably won't provide a fast doubling or tripling of value, nor will I be able to touch and feel the property.
Overall, I think REITs will be the vehicle for real estate diversification in our retirement investment portfolios.
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This is not financial advice. Please consult a professional advisor.
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