3 Ways to Diversify Your Real Estate Investment Portfolio
There are plenty of ways to start your own real estate business and introduce yourself into the real estate market as an entrepreneur. The first step is owning a property which produces a steady stream of rental income.
Some small-thinkers may say that a single rental property is enough to keep them and their business financially secure. Although it isn’t exactly a lie, it isn’t always true either. By aiming to own a diversified real estate investment portfolio you can ensure the safety of your business, your income and yourself.
Top real estate brokers in Dubai always recommend entrepreneurs to diversify their real estate investment portfolios. Diversification of your real estate portfolio only means that you distribute your capital by investing in different types of real estate properties and different housing markets.
One of the main benefits of having a diversified investment portfolio is to reduce risks associated with one type of investment property or real estate market. For example, you can invest in Emaar off plan projects in Dubai or Mina Rashid by Emaar, and then invest in a rental commercial business in Dubai Mall so you get two different types of rental incomes.
Here are some ways to diversify your portfolio:
1. INVEST IN MULTI-FAMILY PROPERTIES
Multi-family properties tend to be more attractive to tenants. They also are also easier to manage due to having all of your units clustered together.
They also reduce the risk of vacancy, which occurs when the real estate investor can’t find a tenant to occupy the rental property. It reduces, as well, the risk of negative cash flow, which occurs when the rental income just can’t cover the expenses that are associated with the property.
2. INVEST IN COMMERCIAL REAL ESTATE
Switching from residential to commercial real estate investing is just one of the most lucrative ways to grow in the real estate business. Commercial properties are an excellent source for paying mortgages and tax breaks.
It also yields a higher return on investment (ROI) than residential properties and there is far less competition among the market. This lack of competition gives an opportunity for investors of diversifying and increasing profits.
3. INVEST IN REITS
Another way to diversify your property portfolio is by investing in REITs (aka real estate investment trusts). REITs are basically companies that own or finance income-producing real estate properties.
Some of the benefits of investing in REITs are: no direct property ownership and the opportunity of getting a passive income.