Real Estate As An Alternative Investment

With the economic downturn and all, more people than not are now aware of the dangers involved with the fluid nature of stock assets

. In turn, investors are now looking towards making money in a less risky and innovative manner. Of course, then, diversification is on everyones mind.

Traditionally, investments were viewed by the general public to be concentrated around the idea of fixed deposits, mutual funds and government bonds. These were considered less risky than alternative investments. However, as time passed, the need for diversifying the general consumers interests in other kinds of alternative investments became a pressing need. This was probably the reason that led to the boost of interest in the real estate investment. The interest isnt confined to the West either: in fast developing countries with a growing middle class, like India and China, real estate investment became a very real opportunity.

The origin of real estate investing can be broadly traced back to the more developed countries like the US, Western Europe and South Asian countries like Japan. In fact, in Japan this form of alternative investment became popular as early as the 1980s. US was quick to catch up with the latest trend and real estate as an alternative investment became very popular in the US in the late 1990s through the early part of this millennium. Banks started lending out with minimal restrictions and favourable interest rates. This started the era of real estate boom, globally.

Again, this phenomenon was not only restricted to the developed countries:this form of alternative investment had a higher growth potential elsewhere. The meteoric rise of companies like DLF, EMAAR-MGF and UNITECH clearly portray the growth potential of real estate in India and the likes. The booming business, however, also came with grave unforeseen consequences.

The first signals of a bubble economy borne of real estate boom appeared in the US as early as the 2005 with the fall in the government backed mortgage firms, Freddie Mae and Fannie Mac. This was followed by series of collapses of mortgage firms, both private and public. It all hit bottom with the fall of Lehman Brothers in 2008. However markets have been stabilizing over the last half a decade and confidence in the real estate sector is slowly being re-instated.

In the presentclimate, real estate still remains a viable form of alternative investment. It is much more secure than other forms of investments - like shares - because, a good property is almost certain to yield high profits. This means that it does not possess the element of uncertainty that the stock exchange is synonymous with. However, it is important to conduct primary detailed checks on a property of ones choice, before making a purchase. This precludes any possibility of future disputes, regarding the aforementioned real estate, in the future. Thus, it is clear that with minimal effort, one can now acquire real estates as an alternative investment form. It has relatively less fluctuations and is comparatively more stable as a form of investment with higher expected returns than many of the so-called safe investments. So, despite of the problems of recent years, real estate investment remains a very safe and reliable avenue to divert investments into.

by: John Financial

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