If you invest in the stock market, you understand the importance of diversifying those assets. There are constant ups and downs and the brokerage account that looked healthy a month ago can easy lose a big chunk of its value.
Real estate investing is typically a bit steadier. While there’s still risk, you don’t have the dramatic swings that you do in stocks, and the assets you own are physical and tangible, making them more valuable and less risky.
It’s still important to diversify. You want to limit your risk and grow the value of that real estate portfolio, so you have to include a number of different asset types, rental markets, and funding sources.
Diversify Your Assets and Investment by Type and Class
When you invest in real estate, you have a lot of choices. Perhaps you focus on long-term Kansas City rental properties, specifically single-family homes. If that’s what your portfolio is mostly constructed of, you might consider diversifying by purchasing a duplex or a small apartment building with six units.
If you’ve only invested in residential real estate and you want to diversify, you can consider commercial properties. Look for large apartment buildings or office space. Industrial warehouses are extremely hot right now due to the growth in online commerce.
There’s a new and growing market for short-term rental properties as well. Sites like Airbnb and VRBO have really capitalized on owners who want to rent out their homes in the short term. That’s another way to diversify.
There’s value to be added and money to be made in all investment classes. When you own different types of properties, you can sustain yourself during big economic shifts. For example, an investor who only owns retail stores will be suffering now. A more diverse portfolio would help that investor manage the drop in physical commerce and the growth in online shopping.
Explore Diverse Markets
Real estate is a local business, so you can’t measure the Kansas City rental market against the San Francisco market. This is another great reason to diversify. If you own rental properties in different places, you won’t have to worry about suffering through a real estate meltdown in your own backyard.
Kansas City is a growing and attractive market. If you’re looking for a new place to invest, consider the opportunities that exist here. You’ll find the home prices are much lower than in other markets of our size. You’ll also have access to a reliable tenant pool and stable rents.
If all your real estate is in one market, and that market hits a speed bump, you’re not going to have to worry about your entire portfolio losing money. When you have a few properties in Dallas, an apartment building in Las Vegas, and some new single-family homes in Kansas City, you’re really spreading your risk and inviting different types of growth and different times.
These are only a couple of things you can do when you’re diversifying your real estate portfolio. You can grow with a 1031 exchange or by leveraging the assets you currently own to acquire new homes.
It really comes down to your investment goals, and we’d love to talk about those. Please contact us Donley Carver Investment Properties. We lease, manage, and maintain investment properties in Kansas City as well as Liberty, Parkville, Gladstone, and communities North of the River.