FUNDAMENTALS
PORTFOLIOS
Design Your Real Estate Investment Portfolio
ACHIEVING BALANCE BETWEEN RISK AND RETURN
by Daniela Andreevska
ummer is often the ideal time to buy and sell real estate. That’s why now is also the time to think about how to design the best real estate investment portfolio for your budget, background, and preferences. Here are a few ways to achieve the perfect balance between low risk and high return in rental property investing. PARTNERUP Optimize the design of your in- vestment portfolio by working with a partner. This is particularly relevant to new investors with no previous knowledge in the field. However, investing in real estate with a partner can be beneficial for an experienced investor as well. Every person brings different expertise, background, and conception to the table, not to men- tion the combined financial resourc - es. Forming a small team can truly diversify investments, minimize risk, and enhance profitability. TRYOUT-OF-STATE Diversification is the key to design - ing the perfect investment portfolio in any industry including real estate. Buying rental properties out of state is one way to achieve this goal. Investing S
away from home is especially import- ant for those living in overpriced mar- kets with high price-to-rent ratios. You should not worry about investing in an unknown location if you are able to identify profitable opportunities. Using real estate data analytics tools, buying with an agent, and hiring a profession- al property manager are a few tactics to make this strategy feasible. BUYDIFFERENTTYPES OF PROPERTIES Investing in properties of different types, sizes, and ages is another way to design a diversified real estate in - vestment portfolio. Economic shocks, social changes, and other unexpected major events (such as the COVID-19 pandemic) don’t impact all properties equally. It is advisable to invest in diverse real estate assets to protect your short- and long-term return. SWITCH STRATEGIES To achieve maximum short-term return on your real estate invest- ment portfolio, you should select the optimal rental strategies. The decision whether to rent out your properties traditionally or on home-sharing plat- forms like Airbnb should be based on
location, rental demand from tenants and guests, and your specific property. Moreover, as a successful real estate investor, you need to adapt and be willing to switch between the short- term and long-term rental options in response to changing conditions in the local market. DON’TBEAFRAIDTO SELL Your real estate portfolio should be flexible in both directions. You should be as ready and willing to sell a property as to buy one, when the right time comes. For example, if a market has experienced major appreciation in recent years, which is expected to slow down, you can sell your high-value property there to buy two cheaper properties in a market forecast to appreciate in the coming years. Similarly, if rental demand has declined in a location, you can sell an asset there to buy in another market with growing demand.
Daniela Andreevska is Marketing Direc- tor at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb in- vestment properties. A research process
that’s usually 3 months now can take 15 minutes. We provide all the real estate information in easy to understand visualizations.
32 | think realty magazine :: july 2020
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