Investment portfolio in Houston – If you want a strong and profitable investment portfolio, you need to make sure it’s diverse.
Financial experts will tell you this is true of your stocks, bonds, and mutual funds. It’s especially true when we are talking about your real estate portfolio. Diversifying your investment properties and the way you acquire them will help you grow the value of your assets and limit your risk.
More importantly, with a diverse portfolio, you’re inviting a larger number of opportunities.
The current market is going to offer you a lot of opportunities, no matter where you are. Investors may choose to acquire different types of properties at varying levels of risk. You might start thinking about new markets, such as Houston if you’ve never invested here before. Even as a new investor, it’s possible to scale growth and increase returns.
Diversify Your Property Type
Diversify Investment Portfolio in Houston – Single-family homes are almost always the investments that owners gravitate towards, and in Houston, this absolutely makes sense. Well-maintained properties in great neighborhoods are in high demand, and tenants are usually willing to pay more for a home with plenty of square footage, outdoor space, and a garage. Single-family homes will do very well in this market, and you can count on their value appreciating quickly over time.
As a single-family investor, you can diversify your portfolio by acquiring small multi-family buildings, or even a unit within a well-managed and highly desirable building. There are many ways that this can help you earn more with your rental investments. These property types will provide more income for you and less risk. Instead of collecting one rental payment every month, you’ll collect two or three or four. There’s more protection against vacancy because if one unit is vacant, you still have income from the other units.
Lower risk and higher cash flow are excellent reasons to diversify the type of investments you buy.
Choose a New Market
New investors typically stay within their own geographical area, where they’re comfortable and they know the neighborhoods. If you’re ready to start diversifying your markets, think about new communities that are attractive to investors.
In Houston, owners are finding high rents and stable tenant pools. Think about checking out this market if you’re from outside of the area.
Diversify Your Investment Financing and Risk Tolerance
Another great way to diversify your real estate portfolio is by experimenting with your financing options.
Many investors pay in cash when they can, especially now when the market is so competitive. Some investors still prefer to take a traditional mortgage, and that’s working in their favor now because rates are so low.
Maybe you’ll get a better deal if you try owner financing. 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.
Think creatively when it comes to how you finance your next property or leverage the assets you already have.
Consider a 1031 Exchange
You can also use a platform like the 1031 exchange to diversify. This is a great idea for deferring taxes and acquiring new properties.
The 1031 exchange serves an effective and growth oriented long-term investment strategy. When you sell an income-producing property, you need to pay taxes on the money that you earn from the sale. But, if you buy a new investment property – or several properties – that are similar to the one you’re selling, you can defer the payment of those taxes.
This is especially beneficial to investors who would face a large tax bill by selling a property. It also allows you to let go of a rental property that’s no longer serving your investment goals, allowing you to gain an investment (or investments) that can provide better returns.
We love talking to investors about how to strengthen their real estate portfolios. If you’d like some additional advice, please contact us at HNB Realty.