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Investing in Income-Generating Assets like Real Estate in 2023

3 Things You Should Know About Investing in Real Estate in 2023 Instead of the Stock Market

 

If you're looking to invest in 2023, you may be wondering whether real estate or the stock market is the better choice. (I bet you can guess our position!) While all investments have their advantages and disadvantages, there are a few things you should keep in mind when considering investing in real estate. Primarily, how to add it into your portfolio easily to capitalize on cash flow and returns, especially in this volatile recession-threatening market.

Managing Risks Is Critical for Real Estate Investors

One of the biggest challenges of real estate investing is managing risk. Unlike the stock market, where you can easily diversify your portfolio, real estate investing requires a significant amount of capital and expertise. It can feel daunting to undergo real estate investing by yourself, which is why people like us at JWB can help make the transition easier, bolstering your knowledge and confidence in making these decisions. 

 

We’ve found the best way to reduce risk is to have income coming in every month, and there aren't a lot of assets that do that but real estate, and especially single-family rental property investing in Jacksonville does this really, really well. We're still facing the prospect of a recession, and it may or may not be as deep as some fear, but either way, this is a defensive time for your investments. You should have assets that historically have smaller ranges of variability and be able to turn your equity into income, find assets that can beat inflation, but with low risk. When you factor in all of those criteria, the answer is clear: real estate investing.

 

Interest Rates Are Essential for Cash Flow

When it comes to real estate investing, the interest rate you receive impacts your cash flow potential. However, it is possible to achieve cash flow– even in today’s market. 

 

Historically, interest rates have always been higher than what we’ve seen recently even going back all the way to the 1970s. In a rising interest rate environment, investments with expected cash flows in the future may be affected, and carry trade could be disappointed. Businesses that have a plan or project that they need to borrow for in the future and need to guage an accurate return on their investment could be in trouble. But our asset class is very different.

The 30-year loan you take out for a mortgage holds your interest flat for the duration of your loan. But simultaneously, property prices around you increase, rental costs increase, so this is a great example of how you can take advantage of debt in an environment where you can lock in your interest rate and have a positive impact on your future cash flow.

 

Real Estate Investing Is Different from Stock Investing

When analyzing stocks, many factors are considered, but one things for sure: interest rates and inflation have a significant impact on it all. There's a significant correlation between stock performance and recessions. When interest rates increase as strong and fast as they have, that affects the bottom line of companies. Now their borrowing cost is a lot higher, which lowers the company earnings and therefore impacts their overall stock price.

 

It's very easy to connect those dots that the next year will be highly variable in the market and outside of the stock market. The stock market is based on growth for companies. Have a well-built ship instead of growing the size of your vessel mentality. Don't just pull everything out and put it into a new asset class like real estate but, you should, however, look at how invested you are, possibly reallocate somewhere with less variability and into a new asset class.

 

Invest into Real Estate with JWB

Real estate investing can offer a great return on investment, but it comes with its own set of risks. By managing your risks through income-producing assets, taking advantage of low-interest rates, and understanding the differences between real estate and stock investing, you can make informed decisions for your investment portfolio.

 

We know that investing in real estate can be a big question mark for a lot of people. The how’s, the what’s, the where’s can really hang you up, so we make it simple. We focus on Jacksonville, Florida, in 4 key neighborhoods where we have demonstrated growth and home appreciation. Schedule your call today.

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If you’re ready to get started with JWB, schedule a strategy session with our property investing experts now!