When most people think of financial planning, their minds immediately jump to stocks, bonds, and retirement accounts. But what about real estate? Whether you’re talking about rental properties, flipping homes, or vacation rentals, real estate can be a powerful part of a well-rounded portfolio.
Real estate offers something the stock market can’t, which is tangible value you can see and touch. Beyond that, it can provide steady income through rent, potential appreciation over time, and certain tax advantages.
In fact, one of the biggest draws for many investors is diversification. Having part of your wealth in real estate means you’re not relying solely on the performance of traditional markets. When stocks zig, real estate often zags and that can help smooth out the bumps in your financial journey.
There are three main categories of real estate this post will address: long term rentals, flipping properties and short term rentals like Air BNBs. There are advantages and disadvantage of each.
First, long-term rentals can create a consistent income stream while the property itself (hopefully) increases in value. If you have the time and patience to manage tenants (or the budget to hire a property manager) rentals can be a way to grow wealth over time.
There is a lot to consider before jumping into owning rental properties, including:
- Interest rate on the loan and parameters (often real estate loans are only fixed for a short time, then will have a variable rate that could increase in the future. Don’t be caught off guard by this and plan accordingly!)
- Property taxes (not just what they are now, but what will they be after you purchase?)
- Cost of insurance (this can vary and it is worth shopping this around and considering options that fit your situation, such as a higher deductible to get a lower premium, etc.)
- Accounting for vacancies and annual upkeep and repairs
Fortunately, there are resources available to help you determine if a property is likely a good investment or a poor investment that may be more trouble than it’s worth.
Next, flipping homes may be something you have considered if the thought of being a landlord isn’t your ideal situation. TV shows make flipping houses look easy, but the reality is far more complex.
Flipping can be profitable, but it requires:
- Knowledge of the local market
- Strong renovation skills (or a trusted contractor)
- A realistic budget and timeline
Done right, flipping can provide quick returns. Done wrong, it can become an expensive lesson in overestimating profits.
Finally, the rise of platforms like Airbnb and VRBO has opened a new income stream for property owners. Short-term rentals can generate significantly more per night than traditional leases, especially in vacation destinations. However, they also come with unique challenges.
Before considering real estate for a short term rental, consider:
- Seasonal fluctuations in demand
- Increased maintenance and turnover costs
- Local regulations that may limit rental activity
Like any investment, real estate isn’t for everyone. It requires capital, patience, and a willingness to deal with unexpected repairs, vacancies, or market swings. The key is to align your real estate strategy with your overall financial goals , not just jump in because it sounds appealing.
A financial advisor can help you evaluate your specific situation and where real estate may fit into your overall plan. Real estate can be a smart addition to a diversified portfolio, but it’s not a one-size-fits-all solution. Whether you’re considering your first rental property or expanding an existing real estate portfolio, the smartest move is to make sure it fits into a larger, intentional financial plan.
If you’re curious about where real estate might fit in your personal strategy, let’s talk. We can walk through your goals, run the numbers, and see if adding property to your portfolio makes sense for you.