Investments come in all shapes and sizes. The investors who see the most profit, boast a diversified, and intelligently put-together portfolio. In this post, we will explain exactly why you should diversify and what you can do to get started!
Why Should I Diversify with Rental Properties?
When we talk about “diversify”, we don’t mean spreading your investing across stocks, businesses, real estate, precious metals and other investments. Diversifying your investment portfolio should be all in the same sector. Otherwise, your “shot gunning” your investment money across many different industries. That is too risky for most sophisticated investors. When you diversify your portfolio, real estate or otherwise, you are aiming to lower your risk, while maximizing your return. Investors will agree that a diversified portfolio will yield the results you are after faster, and with the least amount of risk. Warren Buffet is the first to say, “Invest in what you know”. You should have a plan in place and specific goals in mind. As the market changes, so should your strategy. It is important to be flexible so your investments can change as the market does. In this article, we are talking about types of rental real estate and other ways to invest in the reals estate market.
What Should I Invest In?
- Rental Properties – Owning a single or multi-family property is a great way to provide additional income. Do your homework on being a landlord or hire a property management company to help you navigate the process until you get the swing of things. We offer Professional land lording services that can have many greater benefits than a typical property manager. One tactic many people use is to purchase a property with up to 4 units, living in one and renting out the other 3. A property with 4 units or less will still qualify for a residential loan. The great thing about rental properties is that you can buy 1 or 10. You can start small, and grow it into an empire, or simply own a rental property that pays for itself. Many people do this with their future retirement homes.
- Fix and Flip Properties – Flipping requires a lot of experience, knowledge and math skills. Many people dive in after watching too much HGTV and get in over their head. If you choose to flip homes, it is wise to have a mentor that can help you complete the project without losing your investment. You will need to accurately price repairs, project times and market fluxes. Many people choose to work with a partner. One person being versed in real estate, the other versed in construction. Flipping is a good way to build capital in the right market. Be aware that the income stops when the flipping stops.
- Commercial Properties – Commercial property investment is often over-looked by new investors. It can be a great niche with low vacancy rates if you are in the right location. There are also great tax breaks that come along with commercial property investment. There is less competition and a great opportunity for continual cash flow. This is where having a professional landlord with be worth every penny. Managing tenants in a multi-unit setting is different than tenants that live in a real house.
- REIT’s –Or a “Real Estate Investment Trust,” is similar to a mutual fund, except the trust invests in real estate. They purchase both commercial and residential properties. This is a great option for an investor looking to diversify in more of a hands-off investment. Be ware that you will not own the real estate investment and you will not get the tax benefits that come with a tangible asset.
- Vacation Rental – With sites like Air BnB, renting out your home to travelers has become much easier, There is a bit of hands-on maintenance involved, however, the right property can see great profits over the course of a month. Renting your home out only 15 days of the month at $150 per night equates to $2250 a month! The returns can be higher, but the costs are higher as well. Make sure you have a good property management team and the rental is in a good area that stays busy.
- Niche Real Estate –This includes things like trailer parks, storage units, and land (often leased for recreation, parking, etc.) These niche investments offer low competition and high returns. Many big investors have started in these niches because they were low competition.
What Else Should I Know?
- Many investors invest in multiple states to protect themselves from the geo-specific market changes. We suggest finding an area that has good demographics near your home town and work the area you know best. Rental properties are needed everywhere.
- Crowdfunding services can help to connect developers and investors. These services are typically for people with higher incomes.
How Do I Start my Rental Portfolio?
Contact us. It’s our job to know the market in Warner Robins, Perry, Kathleen and Bonaire Georgia. Start planning right away. Think ahead and set your goals. What are you trying to achieve with your portfolio? Consider up-and-coming areas and do your research! Follow your market trends and keep yourself abreast of major real estate transactions in your area. Look into future zoning and connect with professionals (like us) who can assist you in finding off-market deals.
Are you looking for investment opportunities in the Warner Robins area? We can help! Send us a message, or give our team a call today! (478) 256-9947