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S&P 500 Got You Down? How to Make Money in Real Estate Instead

It’s been a rough year for the S&P 500 — and the people who have money invested in it. The index is down over 23% year to date as of this writing. And given that stocks have really been sluggish since the start of 2022, we don’t know when things will turn around.

If you’re unhappy with the state of your stock portfolio, you’re not alone. The good news, though, is that you have options for investing your money outside the stock market. And one option is to look at is real estate.

A good way to diversify

There’s absolutely nothing wrong with establishing an investing strategy that hinges on putting your money into a broad market index like the S&P 500. After all, the S&P 500 has a history of solid performance and has long rewarded investors who have stuck with it.

Image source: Getty Images.

But right now, stocks are in a slump. And if you’re looking to branch out in your portfolio, it pays to consider real estate.

In that regard, you have options. But one route you may want to consider taking is buying an income property.

The upside of owning an income property is that you’ll have multiple ways to make money. First, you can charge your tenants rent and use that as steady income to build up your portfolio or offset the costs of maintaining your income property.

Right now, rental demand is high because homes have gotten expensive to purchase and finance, so if you have the capital, you could do quite well for yourself. Furthermore, if you hold an income property for many years, there’s a good chance its value will appreciate over time, the same way holding on to S&P 500 stocks or index funds for many years is a great way to make money.

Another option for branching out into physical real estate? Flipping properties. This allows you to enjoy a return on your investment somewhat quickly. However, there are risks involved in house flipping you should know about.

First, your costs might come in higher than expected, which could eat into your profits. Secondly, if you choose the wrong market, you might struggle to find a buyer (though that’s really less of a concern these days, what with housing inventory extremely sluggish and buyer demand high).

If you’re going to purchase a home in disarray to flip, make sure not to overpay and research your renovation costs ahead of time so you don’t get in over your head. You may even want to team up with a more experienced house flipper to benefit from their input and expertise.

Look beyond the S&P 500

Investing in the S&P 500 is a great bet for the long haul. But right now, the index is underperforming, and you may be eager to put your money elsewhere. If so, physical real estate is an option worth looking into.

While the stock market is down right now, home values are anything but. And that means there’s a world of opportunity to make money in real estate, whether in the near term, the long run, or both.

The Motley Fool has a disclosure policy.

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