Regardless of how you choose to invest, diversification is an essential part of finding success.
You need to find investments that have some degrees of separation to them. Fail to do so and when one market fails, all your investments suffer.
They should be free to win and lose without dragging your other investments with them. This is as true with a property as it is with any other kind of investment. If you’re taking a property-centric approach to investing, make sure you’re not just constantly investing in the same kinds of property.
Sell vs rent
Properties for sale and properties for rent are two completely different (and sometimes directly opposite) markets.
When the amount of people buying goes up, the amount of people renting tends to go down and vice-versa. What’s more, they offer two different approaches to property investment.
For-sale real estate aims at substantial profit made all at once, while rental properties work to offer a return over time, making them better suited to retirement or income tools in many cases.
With renting, you can save yourself a lot of the investment by being more proactive as a landlord, too, and be relying less on agencies so you could see returns sooner than you might think.
Tamed vs Wild
Every location is a different market. A city in one state will have a completely different dynamic to a city in another state. However, between those cities, rural real estate also tends to operate on its own rules.
If you find land for sale, it can be one of the safest places to put your money. Rural real estate is somewhat insulated from the rise and fall of housing prices in more urban and suburban areas, for instance.
It also stands to gain the most as a result of neighboring area development. For instance, if there are pipelines, other utilities, mining operations and so on that require the use of your land, it can instantly become a prime earner of passive income.
Domestic vs Foreign
If every city is a different market, then you can imagine what it’s like from country to country. There are global factors that can shift things like housing prices all over.
The vast majority of the time, however, what affects property prices and rental yields in one will have literally zero effect on the other location.
Finding the most profitable areas to invest in worldwide, not just stateside will offer more returns for those willing to take the plunge.
There are quite a few of extra costs involved in overseas investments, however, such as getting independent legal, financial, and translation services to carry out the deal overseas. That means it’s something of an option only for those with significant capital at their disposal.
When you get to that level, however, it’s well worth considering.
It’s easy to assume that all property might share the same market, but that’s not true as the points above have hopefully shown. The next time you find a property to add to your portfolio, ask yourself whether it’s diverse enough when compared to the others you currently own.
Are you diversifying your real estate investment portfolio? I would love to hear how you are dealing with this. Share your thoughts and comments below.