THE BIG PICTURE
STRATEGIES: PROBATES
Diversification Tips
SPREAD YOUR REAL ESTATE INVESTMENTS ACROSS SEVERAL SECTORS TO MINIMIZE RISK.
by Leon McKenzie
here is no doubt that real estate is usually one of the most stable long-term investments. But like every- thing else, this type of investment can experience hiccups. The 2008 recession is enough proof of that. That said, you should still include real estate in your investment portfolio. However, if you want to ensure you minimize the risks, you can diversify your real estate investments across mul- tiple sectors. That way, if one sector of the real estate industry is down, you can still benefit from the other sectors. But how should you go about diver- sifying your real estate investments? What specifically should you invest in? Where do you even begin? T WAYS TO DIVERSIFYYOUR REAL ESTATE PORTFOLIO NO. 1 INVEST IN THE RENTAL MARKET Shelter is one of humanity’s most basic needs. People have to live some- where. They might as well live in the homes that you own. Statistics show there are 42.58 million housing units occupied by renters in the United States. More than 300 million people live in this country, and not all of them can afford to own a home. There is definitely room for you to invest in rental housing. It’s also worth noting that the median asking-price rent in the United States was $1,381 as of 2015. That’s good mon- ey no matter which way you look at it. Should you choose to go the rental
housing investment route, you will have your choice of renters. In many cases, your location will determine the kind of renters that you can rent to. These may include: • Students in college towns • Young, up-and-coming professionals • Dual-income couples with no kids • Families with kids • Low-income renters who qualify for Section 8 housing What works for you may not work for someone else. So take the time to find out which kinds of rental units would best suit your investment needs and preferences. NO. 2 INVEST IN VACATION RENTAL UNITS If you don’t want to rent to long-term residents, then consider investing in vacation rentals. When people go on vacation, they want to stay in a place that will help them relax and enjoy their stay. Not everyone is interested in staying at a traditional hotel, which leaves room for you to invest in vacation rental units that will bring in money. And we are not talking about peanuts, either. The vacation rental market is expected to hit $169.7 billion by 2019! Wouldn’t you like to enjoy a piece of that profitable pie? If you decide to go with vacation rentals as your way of diversifying your portfolio, then consider partnering with brands like Airbnb, FlipKey, Vacations Rentals by Owner (VRBO) and Ho- meAway, among others. These sites are popular with travelers looking for a home away from home and will help
you find temporary renters faster than if you were to advertise on your own. NO. 3 THINK CORPORATE HOUSING How often have you ever thought of corporate housing as a means of invest- ing in real estate? You should. Corporate housing refers to fully furnished temporary housing that you can rent out to corporations or individ- uals looking for accommodations that are usually available for 30 days or more. Housing units of this nature can take the form of apartments and executive suites. This kind of investment tends to be very popular with people on the move or those whose lives are in transition – think mili- tary personnel, business professionals and individuals in the process of relocating. While it may not seem like it, corpo- rate housing can actually be very prof- itable. According to one industry report by CorporateHousingByOwner.com, the corporate housing industry is worth $2.7 billion. That’s nothing to laugh at. You can opt to diversify your invest- ments by actively managing an apart- ment building or two for corporate housing purposes. Alternatively, you can simply invest in the building and let your property managers do all the difficult work. It’s all up to you. NO. 4 RENT OUT SPACE FOR BUSINESS You don’t have to actively become part of industries in which you want to dip your toes. You can partake in their successes simply by investing in what you know best: real estate.
40 | think realty magazine march :: april 2017
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