When making real estate investments, it is important to have a balanced real estate portfolio. Learn more about what one looks like in our latest post!
You might think it is as simple as including residential and commercial properties, but really, there is much more to it! Every strong investment portfolio should include real estate, but what properties are right for you? Some will require more work than others. Some will require a larger investment up front but offer a higher reward down the road. Take a look at some of your options to decide what will work best for you.
Residential properties can provide excellent returns when they are occupied by the right tenants. The goal is to find long-term, quality tenants who simply want a nice place to live. A low-maintenance situation is ideal for both parties.
Commercial real estate can attract high-quality, long-term tenants. The key is buying property in the right locations. You will need to have tenants occupying the units that you think have a strong possibility of staying in business for a while. No matter what kind of property you own, make is desirable by being a good landlord. Make improvements that make the property feel special and unique. Don’t buy a boxy, drab property and expect to charge high-end rent.
Many investors like to find a niche they can capitalize on. Maybe you put your focus on mobile home investments or maybe small apartment buildings. Each will require different levels of management and different associated costs of ownership. Thoroughly research what is involved before making one of these kinds of investments.
Greater Toronto Area land can be an excellent addition to your portfolio. With a considerably lower cost, land investments can be a quick and lucrative way to fill the gaps. You can typically purchase a lot for only a few thousand dollars. You can profit from the property by developing, leasing or by simply holding on to the property until it appreciates to a level you are happy with.
REIT stands for a real estate investment trust. In it’s simplest form, a REIT is similar to crowdfunding in that money is pooled from multiple parties to make a large investment. REIT’s have certain obligations to its shareholders and can be an excellent way to add real estate to your portfolio while remaining hands-off.
A good portfolio will have a mix of all (or most) of the above. Don’t be afraid to explore new types of real estate! You might be surprised at the profits you can achieve from different kinds of properties!
Know When To Hold Them
If you own a property that isn’t performing like you want it to, consider what you can do it order to improve it. Maybe you aren’t making the returns you want because of something you are doing (or not doing.) Make sure you are holding up your end of the bargain by providing nice places for people to live and work.
Know When To Fold Them
When you add real estate to your portfolio, it doesn’t mean that you need to hold on to it forever. Don’t get attached to underperforming properties. You might love the little cottage downtown, but if you can’t keep a good tenant in there, it is probably costing you more than it’s worth.
Know When To Walk Away…
When it is time to sell, have a plan in place. It doesn’t hurt to build a network of local investors who can help you liquidate when you need to. You may not have been able to capitalize on the investment, but someone else might.