Diversifying an investment portfolio is common advice you hear from investment professionals and financial experts. Why? Because it limits your risk and provides different opportunities. Diversity is also important when it comes to your real estate investments.
Smart investors have different properties with different risk levels. Embrace diversity with these simple tips.
Invest in Both Single-Family and Multi-Family Rental Properties
Single-family homes are always going to make great investments, especially when you’re buying rental property in Denver. These homes are in high demand with tenants and you can expect to earn top rents, especially if the home is well-maintained and in a desirable location. Single-family homes will also appreciate quickly, and you’ll find that the value of your asset climbs reliably year after year.
To diversify your portfolio, consider looking at multi-family properties as well. There are many ways that this can help you earn more with your rental investments. They’re going to provide more income for you and less risk. Instead of collecting one rental payment every month, you’ll collect two or three or four. This protects you against vacancy risks. If one unit is vacant, you still have income from the other units.
Lower risk and higher cash flow are excellent reasons to invest in multi-family homes as well as single-family homes. The additional good news is this – multi-family properties are plentiful in Denver, so it won’t be hard to find and purchase a great investment property.
Add Commercial Properties to Your Portfolio
An entire portfolio of residential properties can do very well, but if you add some commercial properties to your investment strategy, you’ll really maximize your potential for diversity.
Commercial real estate often comes with lease terms that are longer and more favorable to property owners. Investors can usually enjoy lower vacancy rates, higher rents, and less maintenance than with residential units. Commercial properties can be anything from retail space to office buildings to industrial or warehouse spaces. You’ll need to be willing to learn a different set of legal obligations and best practices, but commercial properties can really help you boost your portfolio’s performance.
Look at Different Ways to Finance your Real Estate Investments
Another great way to diversify your real estate portfolio is by experimenting with your financing options. Some investors pay in cash and others take a traditional mortgage. You might be able to get a better deal if you try owner financing. You usually won’t need a large down payment, and if you structure the deal so that you’re primarily or completely paying the principal, you’ll find your cash flow and your ROI can improve quickly. You can also breathe some new life into your investment portfolio with things like a 1031 exchange when you want to buy something new and you’re ready to let go of an asset you’re holding.
Helping people invest in Denver is our passion, and we’d love to talk more about how you can diversify your real estate portfolio. Contact us today at Walters & Company.