Do You Need Real Estate to Build Wealth?

Real estate has long been considered a key foundation of building wealth, and for good reason. While you do not need real estate to build wealth, it can be beneficial to include it in your portfolio— whether that be by investing directly in individual properties, or investing in Real Estate Investment Trusts (REITs). Investing in real estate can offer numerous benefits that contribute to long-term financial growth and stability.

Direct Real Estate Investing vs.?REITs

Understanding the differences between direct real estate investing and REITs can help you make informed investment decisions.

REITs offer a more passive way to invest in real estate compared to direct real estate investing. By buying a publicly traded REIT on the stock market, you can invest in a portfolio of real estate properties without having to deal with challenges of day-to-day property management. This makes REITs a convenient option for those looking for a hands-off approach to real estate investment.

Direct real estate investing involves purchasing physical properties such as residential homes, commercial buildings, or land. This approach gives you more control over your investments and allows you to directly benefit from rental income and property appreciation. It is important to note that this style of real estate investing is a much more hands-on approach.

Both REITs and direct real estate investing have their own set of advantages and considerations. For a more detailed discussion on the differences between these two approaches to real estate investing, refer to our past article: REITs vs. Direct Real Estate Investing.

The Benefits of Investing in Real?Estate

In addition to increasing the diversification of your investments, a key benefit to real estate investing is the potential for appreciation in value over time. Property values tend to increase, especially in desirable locations, allowing you to build equity and see significant returns on your initial investment.

Additionally, real estate investments can provide a steady stream of passive income from rental properties or in the form of distributions made by publicly traded REITs. Renting out residential or commercial spaces, or collecting regular REIT distributions, generates a reliable cash flow that can provide an additional stream of income or be used to help fund other investments.

Real estate can also provide tax advantages that enhance your financial position. Tax deductions on operating costs, property improvements, or repairs can help reduce taxable income and in turn, increase overall profitability. Investing in publicly traded REITs can also offer Canadian tax advantages as a portion of their distributions are often taxed at a more favorable rate than other forms of income.

When considering the role of real estate in building wealth, it’s important to recognize the diversification benefits REITs offer. With their ease of purchase and high liquidity?—?they are much easier to buy and sell than physical properties?—?they are a great addition to your investment portfolio.

Is Investing in Real Estate Right for?You

While investing in real estate requires careful planning and management, it remains a powerful tool for individuals looking to grow their wealth over time. Whether through property appreciation, rental income, tax benefits, or portfolio diversification, real estate investments remain a solid choice if you are aiming for long-term financial success.

You should discuss with a qualified financial professional to help you determine if investing in real estate is right for you, and whether REITs or directly investing in real estate is your best option.

Invest in REITs with?Bloom

Established in 1985, Bloom Investment Counsel, Inc. provides actively managed, customized investment management services to wealthy individuals, family offices, foundations, trusts, institutions, and corporations.

For over 25 years we have specialized in investing in dividend-paying equities including REITs. To learn more about how we can help protect, preserve, and build your wealth with a diversified portfolio comprised of REITs and other dividend-paying equities, call us at 416–861–9941 or email us at [email protected].

This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.