Why Own Investment Property — Part of a Diverse Portfolio
Diversification is difficult to achieve, but extremely important. As the recent market drop has demonstrated, most investments suffered as a group. Most investments in the market move together, indicating a high degree of correlation. In other words, investments in the market are only weakly diversified.
We believe that direct ownership of selected real estate with proven rental value provides true diversification, as well as several distinct advantages within a diversified investment portfolio. First is current income. Few, if any, other assets offer the 9-12% return on investment (ROI) that RBS homes produce. Few investments offer the stability and inflation protection of investment property from RBS. In the recent decline, RBS homes maintained their value much better than market-traded assets.
Real estate investment trusts (REITs), another approach to real estate investment, demonstrated their weakness over the past market meltdown. REIT prices tracked the market decline, exposing their owners to the entire market risk. Further, REITs invest in commercial and retail real estate, rather than single family homes. Direct ownership of single family homes in the Houston metro area through RBS eliminates exposure to financial market risk and focuses on the most stable segment of the real estate market, in a growing region.
Income property should not be the bulk of a balanced investment portfolio. But many investors are concerned about inflation protection, current income, and asset stability. For these investors, income property can be a large portion of the total portfolio.