In order to diversify your portfolio and protect yourself from losses, you might be considering purchasing real estate as an investment in 2017. It’s one of the most popular investments among Americans, with almost 70% of Americans investing in real estate at some point in their lives [1]. But to really protect your portfolio, you need to do more than simply invest in real estate – you also need to diversify your investments within that category. Luckily, there are plenty of ways to protect yourself against risk when you diversify your real estate investments this year. Here are 10 tips that will help you do just that.
1) Location, Location, Location
Location, Location, Location. It’s a three-word mantra for investors of all stripes and should never be ignored. You may have a great idea for an investment property, but if you’re not in the right area it’s going to be tough to make your money back. That said, there are still some things you can do even if you’re in the wrong location.
2) Consider Different Types of Properties
Different types of properties will help you diversify your portfolio, so it’s important to take a look at what is available in the market. Here are some questions you’ll want to ask yourself:
- What type of property do I want? – Do I want an apartment building? – Do I want a house? – What is my budget?
The answers will help you narrow down your options.
3) Look for Properties with Good bones
Start by looking for properties that have good bones, meaning they are structurally sound and have potential for a renovation. Properties in poorer condition will require more time and money upfront for repairs, but renovations can pay off in the long run if you keep them up. Once you find a property you want to buy, make sure that it has been inspected by an appraiser or home inspector before committing any money.
4) Have a Contingency Plan
One way to diversify your portfolio is by investing in real estate. However, the market can be volatile and you may want some reassurance that your investment will be safe from any economic downturns. To do this, I would recommend putting a contingency plan in place to give you peace of mind.
5) Work with a Qualified Agent
If you are looking for a way to diversify your portfolio, real estate is a great option. Make sure that you work with a qualified agent who is knowledgeable about the area and can help you make the right decisions.
6) Get a Property Inspection
Do you know what you are getting into? Buying a piece of property is one of the most important decisions you will make. One way to help ensure that your investment is safe and sound is to get a professional property inspection before you sign on the dotted line. After all, an ounce of prevention is worth a pound of cure.
*A property inspection can find problems that are not visible from the outside such as termites, mold or faulty wiring.
7) Have a Mortgage Pre-Approval in Hand
One of the biggest mistakes you can make is not getting pre-approved for a mortgage. You’ll never know what you can afford until you have your pre-approval in hand. Plus, if you’re already working with a mortgage broker, there’s nothing more they will need to do when it comes time to buy. If you’re not currently working with a mortgage broker, be sure to have one lined up before starting your search.
8) Review the HOA Documents
The HOA documents are the written rules set forth by the homeowners association. It is important that you review these documents before purchasing a property so that you are aware of what your responsibilities will be as a homeowner. Some of the common regulations set forth by HOA documents include regulations on pets, parking, and landscaping.
9) Have a Realistic Renovation Budget
Having a realistic renovation budget is key in the real estate game. If you don’t have an accurate idea of how much your project will cost, you’ll find yourself overspending and quickly burning through your budget. It’s important to know what type of renovations you want and when you want them done before putting together a budget.
10) Don’t Go it Alone – Find a Partner
It’s not always easy to go it alone, which is why we recommend finding a business partner if you can. A business partner will give you a fresh perspective and someone on your side who is invested in the success of the company. Plus, they’re great for brainstorming ideas and bouncing around new concepts. It’s important that both partners are committed to the business and its goals, so make sure you find someone who has good work ethic and is as dedicated as you are!