Diversifying your real estate investment portfolio is a great way to protect yourself against potential losses. It can also help you earn more ROI. Investment professionals are always encouraging their clients to diversify, and there are a few ways you can do that with your rental properties.
Consider Commercial Rental Properties
Perhaps you’ve stuck to a steady diet of residential rental properties throughout your investment career. Maybe commercial properties seemed too expensive or complicated. Perhaps you think the market is too volatile.
However, commercial spaces in and around Lakewood and the West side of the Denver Metro area are actually pretty hot investments right now. And, there’s plenty of diversity even within this investment space. When you buy a commercial property, you can look for opportunities in office space, warehouse and industrial buildings, retailers, and restaurants. You have a lot of options. Lease agreements are usually more favorable to landlords, and the terms are longer. You won’t have the turnover or the vacancy that often comes with residential real estate.
Multi-Family Properties are Great Investments
It’s easy for investors, especially new investors, to gravitate towards single-family homes when it’s time to acquire a rental property. Most of us live in single-family properties ourselves, so it’s a piece of real estate we feel we understand. However, multi-family properties can be excellent investment opportunities.
You protect yourself against vacancy risk when you own a duplex, four-plex, or even a small apartment building. When one unit is vacant, you’ll still have money coming in from other renters. These properties also consolidate maintenance expenses and allow you to increase the overall value of your portfolio fairly quickly. Consider buying a multi-family property if you’re hoping to diversify your investments. There are a lot of great opportunities in Lakewood and the West side of the Denver Metro area.
Diversify Your Financing Options
Another great way to diversify your real estate portfolio is by exploring different financing opportunities. If you typically pay for properties in cash or with a traditional mortgage, why not consider owner financing for your next investment? This can give you a lot more flexibility and drive up your cash flow right away. You can often get more favorable terms and less risk.
There are other ways to move your money around when you’re investing in real estate. Refinancing can free up some cash, and you can do a 1031 Exchange when you’re ready to let a property go that you’ve owned for a while and you want to find something new. Be willing to think outside of the box.
Consider Other Markets
A great way to diversify your portfolio is by exploring rental markets outside of where you currently invest. If you are in California or a city on the east coast, consider looking in smaller markets where you can get a lot more property for a lot less money. Increase your knowledge about other markets, and talk to property managers and real estate experts in those areas to learn more about what you can expect in terms of tenant pool and rental value.
These are just a few ways to diversify your portfolio of investment properties. We have additional ideas, and we always love talking about them. Contact us at Assured Management for more information.