If You're Investing in Real Estate, Make Sure You Do This One Thing

It should be a key part of your overall investing strategy.

Investing in real estate isn't for everyone, especially since there are some unique risks to consider. When you buy stocks in a brokerage account, there's always the chance they'll lose value. But if a given company you own encounters an unexpected expense, it's not going to come after you as a shareholder and ask you to fork over thousands of dollars to deal with it.

When you own physical real estate, there's always the chance that something will go wrong with your property, because that's just what happens when you own a home. You could buy a rental property only to have the roof fail three years later, requiring a repair that's going to have to come out of your pocket.

Despite the risks, investing in real estate can be a very lucrative prospect. And it can also be a great way to diversify. If your portfolio right now consists largely of stocks, exchange-traded funds, and bonds, buying real estate is yet another way to branch out and explore a different income stream.

But if you're going to invest your money in real estate, it's important to take the right approach. And it's a good idea to heed the advice of one seasoned real estate investor.

Don't plan to get rich quickly

Buying real estate in the hopes of making a quick profit is unlikely to work out well for you. A better bet? Plan to hold onto any income property you buy for many years.

In a recent tweet, real estate and investing guru Graham Stephan said, "If you're investing in real estate, play the long game." And the reason he says this is that real estate has a tendency to gain value slowly but steadily over time. If you sell too quickly, you might short yourself on profits or, worse yet, lose money.

Granted, between mid-2020 and mid-2022, U.S. property values soared. But that's not what normally happens in the housing market. That trend was fueled largely by record low mortgage rates and the rush on the part of would-be buyers to capitalize on them.

Normally, home prices gain value slowly but steadily year over year. So if you want to make a nice profit on an investment property, you'll need to be prepared to hold onto it for a long time.

Case in point: According to Federal Reserve data, the average U.S. home price during the third quarter of the year 2000 was $204,100. During the third quarter of 2019, before home prices started to soar, it was $382,700. That's a big jump -- but it certainly didn't happen overnight.

A strategy to apply to your entire portfolio

Buying quality assets and holding them for many years is a strategy worth employing no matter what investments you're considering. So whether you're looking to put money into stocks or real estate, plan to buy and hold for as long as you can. Exercising patience could really pay off for you in the long run.