How To Include Real Estate In An Investment Portfolio

There are a astounding variety of different investment products that are available to investors today. There are varying risks and rewards that go along with each one. One can feel that in order to understand each product requires a university degree, but you can improve your chances of success by doing your homework.

We have all heard about the importance of keeping a diversified portfolio. Having different types of investments instead of just one type helps to protect your money by diluting the risk. You can think of it in terms of being a multi-pronged strategy to investing. One leg or type of investment could be made up of stocks, bonds, and savings.

The next type of investments are known as commodities. These are goods such as oil, gold and silver. They can result in very high returns but high returns are accompanied by higher risk. Usually commodities are the territory of the experienced investors who have the ability to to evaluate the market.

Real estate is always a good investment but not everyone has the funds to go out and start buying property. To apply the Toronto residential real estate market as an example the average value of a property is over $300,000 with commercial real estate being even more. But there are other ways to invest by buying Real Estate Investment Certificates or REITSs.

These are entities that go out and buy property or interests in hotels, office buildings, shopping malls and even mortgages. As an investor you are able to select which type of REIT you want. Equity REITs are investments in real estate. They make money by charging rent. To use Toronto as an example again you may have shopping areas with a Wal-mart, Home Depot, Payless shoes etc. that are all leasing buildings from the property owners. All together these Toronto properties are all generating income from rents for the REIT and its investors. The next type of REIT comprises of the lending of mortgage funds generally to developers or property owners. Can't decide which one is best for you? In that case a Hybrid REIT that is a combination of the two may be your best option.

One risky type of real estate invest is called an option. This is simply a purchaser is making what's called an "option for consideration". An offer is put forth on a property based on the intention that certain conditions will be fulfilled. During this time the property is taken off of the market in return for a small amount of money as a deposit. This can be risky since the purchaser stands to loose their deposit if the conditions are not fulfilled. The reward is that the purchaser can attempt to sell their option to a third party and make a tidy profit in a very short time. To do this right a purchaser must research the market thoroughly.

It can be confusing at times but the more you know the better off you will be. Long term investing is the key and real estate has proven to be a great option for investors and even with the many As real estate has proven in the past long term investing is the goal and when compared to other forms of investment products, real estate comes with the least amount of risk. This makes it is an important part of any portfolio.

Stefan Hyross writes on behalf of Lea Barclay, a sales representative and specialist in the Toronto residential real estate market. Feel free visit the site for more information and to browse through Toronto properties available for sale and lease.