Building a profitable real estate portfolio relies on investment diversification. For example, real estate investment trusts (REITs) have the highest average annual return (11.8%) in long-term investments in this sector. Diversification essentially involves investing in different types of assets, with the aim of reducing your portfolio’s overall risk. The more diverse assets you have, the less impact a single asset loss will have.
Purchasing investment property
Owning investment property can allow you to boost income via rent. If you’ve identified a property that promises a high return on investment, there are plenty of ways you can amass enough funds for purchase. To make the down payment, consider using a home equity line of credit — a secured line of credit against your current property. You’ll be offered a much lower rate because of the collateral and able to invest without technically using your funds. Personal loans from short term lenders can be used to make the complete purchase of the property. You will, however, need to prove to the lender you’re not a big risk. You may also be asked that your credit history meets certain criteria.
You can generate income by investing in the stock market. REITs (real estate investment trusts) are corporations that own and manage a portfolio of real estate properties. Buying shares in a REIT can provide you with the financial benefits of real estate ownership without the hassle or expense of being a landlord. As an investor, you can profit from rental income and sold properties, as well as payments received on loans in mortgage-backed securities. 90% of REIT profits go to investors and dividends are normally steady.
Crowdfunding has become a popular way for investors to buy shares in specific real estate ventures (like house flipping, for example). You only need to buy a small share in one project, which allows you to spread your money across various projects to reduce risk. Depending on the project, crowdfunding platforms require minimum investments as low as £10 and as high as £5,000. As an investor, you can select pre-vetted properties to invest in with estimated (unguaranteed) income and capital gains. You’ll generate income through rental profit and property sales.
When it comes to real estate investing, there are plenty of potentially lucrative opportunities to add to your portfolio. However, it’s important to remember more assets doesn’t necessarily equal a diversified portfolio. Investing in a variety of different opportunities across different locations is key to creating a diverse portfolio and reducing risk.