Three Tips For Diversifying Your Investments With Real Estate

Buy sell Property & Real Estate Investment Guide

Buying Property Tips#1: Choose the Right Location
Before you choose a location, it is of utmost importance that you consider the development prospect of the area. Other factors to consider here is crime record of the area, availability and nearness of public facilities and utilities.
Buying Property Tips#2: Study the Local Market Dynamics
It is important to get well familiar with the local realty market. Learn the variation in property prices by street. Don’t shy away from asking a few realty investment agents questions to get better insight on the matter.

You are probably already aware that you can diversify your investments with real estate and that you can create stability and more wealth by dividing your investment capital between active and passive investments. However, while most “expert” advice doesn't go much farther than, “Invest in real estate to stabilize your portfolio,” there are actually a number of ways to do this. If you use any of the tips and strategies outlined below, you should enjoy more wealth from your diversified real estate portfolio.

Don't Just Invest in a Single Property

First of all, if your financial advisor and/or funds manager doesn't have a lot of experience with real estate, they may not have the best recommendations for you. Many advisors don't treat real estate assets the same way that they treat other assets, and this can cause some confusion.

However, if you want to get the most out of your real estate investments, you should spread the wealth among a few different properties and projects. If you invest in a single project, and it fails, you'll have lost all of your real estate investment capital. If, on the other hand, you invest in multiple projects, you will be more likely to get positive returns on your investments. A single failure can be absorbed by the returns from your other investments.

Buying Property Tips#3: Choose the Right Property
Getting the right property right away is quite unlikely. First, you need to be clear on why you want to buy an investment property. After that, you will be able to make right decision based on factors like remoteness or accessibility of the property.
Buying Property Tips#4: Do the Math Properly
Get a precise idea on the value of assets you have available. If you are investing in rental property, make sure you can easily cover the mortgage payment through rents. Additionally, get a clear idea on the appraisal value of the property beforehand.
Buying Property Tips#5: Consider Additional Expenses
When purchasing an investment property, it is not only the selling price that investors need to consider. There are various additional expenses such as property tax, home owner’s insurance, repair & maintenance that must be considered.

Mix Active and Passive Assets

As you diversify investments with real estate, remember that you can actively manage some of your real estate assets while you maintain others as passive income streams. For example, in addition to buying rental properties and hiring a property management company to take care of the details for them while you collect passive income, you can also make equity investments where you pool your capital with other investors.

Equity investments with a REIT (real estate investment trust) can be bought and sold as shares in the trust. Thus, they can either be passive or active assets. You can either hold onto your shares, and collect your quarterly payout, or you can sell your shares and put them in another investment, depending on the market value of your equity, how much you expect to get in your quarterly payments and other factors.

Look Into Crowdfunded Properties

Of course, many REITs have minimum buy-ins to purchase shares, and that can take up all of your funds for your diversified real estate portfolio. Just investing in a single trust isn't a very good way to diversify, but more and more accredited investors are turning to real estate crowdfunding platforms for the opportunity to divide their investments funds as they please among different projects of their choosing.

As you diversify your portfolio, we highly recommend enlisting the aid of an experienced real estate investment advisor who can help you build your portfolio while maintaining its stability.

Buying Property Tips#6: Inspect the Property
To ensure that you are getting everything you are paying for, a thorough inspection of the property is essential. Besides ensuring that you are not overpaying, a rigorous property inspection also gives you a good estimation on what the additional expenses might be.
Buying Property Tips#7: Pick the Right Financing Option
While interests on investment property loans are tax free, some borrowing costs aren’t immediately tax deductible. Knowing that, and structuring your financing in accordance is crucial. Don’t hesitate to ask for help from a financial advisor.
Buying Property Tips#8: Invest through Equity
One of the best ways to purchase an investment property is to leverage the equity of another property (including your primary home). This is a preferable way among regular investors, especially due to added tax deduction advantages.
Updated: March 17, 2018 — 8:28 am
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