To protect your wealth and earn more on the real estate investments you’re making, it’s a good idea to diversify your portfolio. This means different things to different investors. For some, it’s buying both single-family homes and multifamily properties. For others, it’s diversifying in the way you finance your acquisitions.
Creating a diversified portfolio is one of the best ways to minimize risks and increase long term returns. The best ways to diversify is by changing up the markets you choose to invest in, and experimenting with different types of real estate assets.
Investing in Different Markets
Changing geography can be a great way to diversify. You don’t have to live in the market that you’re investing in. For example, if you’re an investor in Chicago or Baltimore who is looking for a new place to buy and rent out homes, you can consider a market like Lancaster. You won’t be here physically, but with an experienced Lancaster property management company helping you identify opportunities and then lease and manage your home, you can expect successful outcomes.
A lot of investors make the mistake of focusing on a single market. Usually, this feels comfortable. But keeping all of your real estate investments in a single market isn’t as safe as it may feel. In fact, it creates some extra risk. If the economy in that one area takes a dive or the major employer goes out of business, your real estate is at risk. You won’t earn as much and your asset won’t be worth what it once was.
Diversifying the geography of your real estate portfolio is important because you’re exposed to the dealings of each market. Diversify into new markets and different locations so you don’t have to rely on the strength of a single area.
Diversifying Types of Real Estate
Consider investing in diverse asset classes. Think of investing in single-family residential properties, multi-family residential properties, as well as commercial real estate. This type of diversification will really maximize your potential for both cash flow and ROI because each of those property classes has stronger returns during different parts of the market cycle. If you own all apartments or only commercial office spaces, you’ll increase your risk as the market turns. Diversifying allows you to take advantage of rental income and returns from various parts of the market.
This might feel risky, especially if you’re a new investor. If you’ve only ever invested in residential real estate, making a commercial purchase can seem a bit uncertain. If you never thought beyond the single-family home market, buying a small apartment building might seem foreign. It’s easy to stick with what you know, but if you’re willing to step outside your comfort zone, it can help you earn more on your real estate investments.
Working with experienced Lancaster property managers can help you make smart decisions. You’ll get some great advice on where the market is performing well and how you can maximize your investment. If you’d like to talk through your options, please contact us at Fetch Home Management. We have the experience you need to successfully meet your Lancaster property management needs.