Whether we’re talking about a real estate portfolio or a general investment portfolio, the professional advice is always the same: diversify.
It’s important to diversify what you own because that reduces the risk and it also provides opportunity for you to grow and scale. If you’re satisfied owning one or two properties, that’s great. However, if you want to grow as an investor and increase what you earn, you’ll have to keep acquiring. Eventually, diversification will become necessary in order to have a well-rounded portfolio.
Diversifying a real estate portfolio comes with a number of advantages. If you haven’t considered exploring different types of properties, funding sources, and markets, it’s time to think about where you want to go next.
Reduce Your Risk with a Diverse Real Estate Portfolio
You’re likely investing in what you know. Maybe your entire portfolio is made up of units in mid-size buildings or perhaps you only invest in small apartment buildings. If that’s the case, consider looking at a single-family home or even some commercial space. This will give you something different and you’ll spread the risk so that you stay strong if one particular sector begins to falter.
The smart way to diversify is to acquire investments with more stability and potential for appreciation. If you’ve focused on commercial property investment, perhaps it’s time to diversify by acquiring residential real estate. Start small and see what kind of results you get.
Leverage the Real Estate You Own Currently
Another potential way to diversify your real estate portfolio is by experimenting with your financing options.
Many investors pay in cash when they can, and some investors still prefer to take a traditional mortgage. Make sure you’re leveraging the equity you already own to increase what you’re able to buy and to diversify what you have in your portfolio.
Some investors are finding they can get a better deal with owner financing and alternative funding sources. 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.
Every type of financing comes with a certain amount of risk. Explore all the options and see what you can do to leverage the property you currently own.
Diversify Your Rental Markets
We like the Oshawa rental market for a lot of reasons. If you’re an investor from outside of the area, however, you may be looking for new regions to explore. This is a good idea if you’re located in a market where it’s difficult to successfully buy and rent out a property that earns positive cash flow. A lot of investors from Toronto come to markets like Oshawa and Durham looking for better profits. It’s a good way to increase the strength of your current portfolio.
Make sure you do your research so you understand the market you’re planning to enter. Always talk to a professional Oshawa property management company there.
It’s our position that multi-family properties remain the best estate-building vehicles for the average investor. However, you never want to stay stagnant. If you’d like to talk about how to diversify your specific portfolio or you need to talk through some new real estate goals, contact us at Investor’s Choice Property Management. We’d love to talk about the opportunities in and around Oshawa.