How Brokers Should Adapt to the New Era of Real Estate Investments to exploit their benefits
With everyone concerned about inflation, especially in the last couple of years, it’s a good time to talk about hedging. As a realtor, one of your duties is to get your clients the best deals they possibly can. In this sense, it is in your best interest to constantly show the benefits of investing in real estate.
Real estate is one of the best hedge assets in the world, if not the best. But, as a matter of fact, a lot of people think they won’t be able to invest in real estate because it usually takes a lot of initial capital to get into it in the first place.
The types of real estate investments have been changing since the era of digitization began. And, as a broker, your role needed to adapt to the circumstances. Now it is not enough to coordinate open houses, interview buyers and sellers, or schedule property showings. You need to step up your game.
In this sense, new technologies not only allowed people to invest from home, but expanded the universe of investments to a whole new level. Throughout this article we are gonna talk about how real estate investment works as a great hedge and how new trends like tokenized real estate have changed the landscape.
Benefits of Investing in Real Estate
The real estate market is one of the most reliable industries all around. No matter what type of investor you might be working with, most of them want to (or aspire to) include real estate in their portfolio because of the many advantages it can provide.
Here’s why real estate is the single most important investment asset:
- Appreciation: Values in real estate only tend to go up.
- Portfolio diversification: For both profit and hedge, real estate should be in every investor portfolio.
- Low risk investment: It’s one of the most stable assets in the world with almost no depreciation.
- Cash flow: You can generate a constant monthly income and reinvest it to increase your wealth.
- Long term financial security: Properties are not going to move from where they are. Even in the worst-case scenario, real estate provides stability and serves as backup in every financial planning.
Protecting your Clients Against Inflation with Real Estate Investments
When it comes to investing in their future, you should always advise your clients to consider inflation effects. Most people invest in IRAs or 401(k) as retirement plans and a lot of them don’t take inflation into account.
Real estate has proven to be a great hedge when it comes to revalue over time. Of course it is not a scientific fact but the property market turned out to be the quintessential asset every time someone wants to invest without compromising their capital.
While accumulated inflation for the last 10 years was about 28%, the real estate revalue for over 90% according to the US Department of Housing and Urban Development.
So, in short, this all sounds great but as a realtor you know that to get into the traditional real estate industry it’s not so easy. So if you want to expand your clients portfolio you need to offer them more than a property. You need to find alternatives.
Expanding Your Horizons as a Broker
You surely know this, but, as a real estate agent, your best advertising technique is word of mouth. In the end, there’s nothing more effective than a happy client singing praises about your (super profitable) advice.
But what happens when your clients don’t have enough capital to invest on an entire property? Is that it? Are they supposed to go out the door? Is the real estate market as closed and gated as people usually think?
Well, it used to, but not anymore. Now, smaller investors do have an option.
In the last twenty years, the real estate market has seen a lot of change, specifically thanks to the crowdfunding model.
In a nutshell, crowdfunding real estate is a method to fundraise different projects pre-selected by the portfolio managers of the crowdfunding company. The advantage of this model is that it requires minimum investment, which opens up the market to newcomers.
This way, bigger investors can go for more ambitious projects through crowdfunding platforms, while smaller investors with less capital can also get into great development deals that otherwise they wouldn’t be able to be part of.
Tokenized Real Estate: A New Way to Invest
Whether your clients are millennials that seek for a future proof investment or they are more mature investors who’d like to diversify their portfolio, tokenized real estate is a great alternative.
Tokenization is basically digitalizing an asset through blockchain technology. This allows to fragment the ownership of a property into tokens that are tradeables.
The benefits of investing in tokenized real estate are primarily security, transparency, reduction of costs, and immediacy in every transaction.
Combining tokenization with a crowdfunding system creates a high-standard security real estate investing platform that enables smaller investors to get started with an affordable sum of money.
Where to Start?
If you’re an old school realtor, these new investing options can be a little bit overwhelming, but they’re not that scary.
What you should always consider is that, if you want to stand out from the crowd, you need to add value to your brand. Which is why it’s critical that you keep up with the latest trends on the market.
This way, you can widen your portfolio offering by adding more innovative real estate investing alternatives, just like tokenized real estate assets and fractional investing models.
If you want to learn how to incorporate these new investing options into your services, you can check our article about how tokenized commercial real estate will improve your business. Go for it!