Diversifying an investment portfolio is common advice because it limits your risk and provides different avenues of opportunity. Diversity is also important in your collection of real estate investments. When you have multiple types of properties and different levels of risk, you can scale your growth and increase your cash flow.
We have some tips for investors who are looking for ways to diversify their real estate assets.
Buy Single-Family and Multi-Family Properties
Single-family homes will always make great investments, especially when you’re buying rental property in Colorado Springs. These properties are in high demand with tenants and you can charge top rental prices, especially if the home is well-maintained and offers plenty of space, a yard, and a garage. They also appreciate quickly, and you’ll find that the value of your asset climbs reliably year after year.
To diversify your portfolio, consider looking at multi-family properties as well. There are many ways that this can help you earn more with your rental investments. They’re going to provide more income for you and less risk. Instead of collecting one rental payment every month, you’ll collect two or three or four. This protects you against vacancy risks. If one unit is vacant, you still have income from the other units.
Lower risk and higher cash flow are excellent reason to invest in multi-family homes as well as single-family homes.
Consider Commercial Properties
An entire portfolio of residential properties can do very well, but if you add some commercial properties to your investment strategy, you’ll really maximize your potential for diversity. Commercial real estate often comes with lease terms that are longer and more favorable to property owners. If you buy the right property, you’ll have lower vacancy rates, higher rents, and less maintenance than with residential units. Commercial properties can be anything from retail space to office buildings to industrial or warehouse spaces. You’ll need to be willing to learn a different set of legal obligations and best practices, but commercial properties can really help you boost your portfolio’s performance.
Explore Different Financing Options
Another great way to diversify your real estate portfolio is by experimenting with your financing options. Some investors pay in cash and others take a traditional mortgage. You might be able to get a better deal if you try owner financing. You usually won’t need a large down payment, and if you structure the deal so that you’re primarily or completely paying the principal, you’ll find your cash flow and your ROI can improve quickly. You can also breathe some new life into your investment portfolio with things like a 1031 exchange when you want to buy something new and you’re ready to let go of an asset you’re holding.
We love to talk about how to be a smarter and more profitable real estate investor. For more information or extra help, contact us at Muldoon Associates. We’d be happy to help you diversify your portfolio of real estate assets.