The Risks of Sitting on the Sidelines

Choosing not to invest in real estate is a conscious decision. By doing so, you are betting that your alternative financial choices—such as keeping your money in savings accounts or investing in the stock market—will yield better returns than real estate. But just like investing, sitting on the sidelines comes with its own set of risks.

You’ve likely heard the common concerns: “Real estate is too risky,” “We’re due for a real estate crash,” or “What if a tenant doesn’t pay rent?” These questions reflect valid concerns, as all investments carry risk. But what if we flipped the narrative? The real question becomes, “Can you afford not to invest in real estate?”

Choosing not to invest in real estate typically means placing your money elsewhere, such as in a savings account or the stock market. While these may seem like safer options, they come with their own risks, especially in today’s economic climate.

There is risk with most of our traditional income sources. Whether it is stock market volatility, inflation, relying solely on W2 income, or simply choosing not to put your money to work for you.

For example, rampant inflation has many rethinking their cash on hand. If inflation is, let’s say 8% - meaning at its core that most things we purchase are becoming 8% more expensive - it is becoming clear to many what is happening to our cash. Choosing not to invest this cash has risks, including that cash becoming less valuable by the day, and our buying power decreasing.

While real estate, like any investment, carries risk, it also offers unique benefits that can act as a hedge against the risks mentioned above. Here are several reasons why investing in real estate now can be a smart choice:

There is no avoiding risk in life, whether you invest in real estate or choose to keep your money elsewhere. The key is to consciously weigh the potential outcomes of each choice. You may be able to mitigate your risk by pairing real estate investing with other parts of your life and portfolio.