Diversifying an investment portfolio is the key to withstanding market volatility. Real estate is a key investment because land is limited.
Construction rates are rising, cities are becoming more densely populated, and prices for real estate are rising.
A diverse portfolio reduces market risks, but there’s also diversification of the same asset type. What does this mean? Invest in different forms of real estate to keep a real estate portfolio as diverse as possible.
- Crowdfunding Opportunities Allow for Vast Portfolio Diversification
Crowdfunded real estate projects are a thing. Projects often want to raise $50,000 to $3 million, and these properties can be anything, from apartment buildings to shopping malls. Returns vary greatly, but a $10,000 investment often yields $700 to $1,200 for a year investment, and this figure can rise to $5,000 – $10,000 for investments of three years or longer.
Annual returns for Fundrise are 8% to 11%, depending on the investment. Realty Mogul seems to be more exclusive, yet members are granted access to exclusive listings that allow for opportunities not available in a normal investment portfolio.
- Luxury Property Rentals and Flipping
High-end investors are experiencing a rise in the number of luxury property rentals and sales. Access to these properties is often only reserved for exclusive, rich investors. Social media has changed that..
@Luxury_Listings is a prime example being a social media account that turned into a global platform which has sold $80+ million in luxury properties.
The world’s most desirable properties are listed by bringing together the top 1% of real estate professionals worldwide. The platform even has a exclusive off-the-market listings for interested investors. The leading real estate platform on Instagram, Luxury Listings gives an insider glimpse into the world of luxury property to over 1.5 million followers.
These properties can be held and sold over the long-term, or turned into high-end rentals that provide a monthly income to the owner. Exclusive properties provide buyers with options that they can’t find anywhere else in the world.
- Invest in Well-Known REITs
Real estate investment trusts, or REITs, are a great way to invest in real estate, and the fund worries about the diversification. You are investing in different trusts, which may include apartment buildings or shopping malls or anything real estate-related.
Vanguard’s REIT ETF (VNQ) is often recommended to novice investors because the REIT is focused on the US market, and they buy into many of the largest public companies.
The fund invests in several of the largest REIT companies, including Public Storage (PSA), Simon Property Group (SPG) and Prologis (PLD).
There are plenty of REIT options, and with a widely diverse holding, these REITs are less susceptible to market fluctuations and risks.
Schwab’s U.S. REIT ETF (SCHH) and iShares U.S. Real Estate ETF (IYR) are also great options. There are a wide range of REIT options, so choose one that has a portfolio that is diverse enough for your risk appetite.
A mix of rental properties, long-term holdings and short-term holdings will often provide the best outcome. Rental properties offer income-generating assets, while long-term holdings will provide value over time to the portfolio.