Real estate is often safer and less volatile than similar investments on the stock market, but not always. As we’ve seen in recent decades, real estate prices aren’t always stable, and a desirable area can quickly lose its appeal due to a range of factors. So, is there a way to gain financial security as a real estate investor? By making savvy decisions, you can build a profitable portfolio and mitigate risks. Certified Distressed Property Expert and Investor Specialist Omid Akale explains a few ways to create a stable real estate portfolio.
Look for Core and Core-Plus Properties
All investment strategies come with their potential risks and returns. Opportunistic investments, which can include new property developments and distressed homes, tend to have the highest potential rewards but also the highest risk. Core and core-plus investments, such as modest capital light repositioning and stabilized acquisitions, target lower returns but create more stability.
Core investments usually come with confirmed historical occupancy rates and cash flows. These properties often retain their occupancy rates during economic downturns, making them dependable investment options.
Search for Multifamily Housing
Historically, choosing stable investments in multifamily housing has been a top-performing commercial real estate asset with low volatility levels and average annual returns. In most areas, multifamily housing beats hotels, retail spaces, and office buildings.
One reason why multifamily housing is generally considered a safe real estate investment type is that it provides a basic need – shelter. While people will always need accommodation, companies might not always require their office space, particularly if a region loses its commercial appeal (in which case the office space could become a permanently distressed asset), as is frequently the case post pandemic.
Find Real Estate in Strong Geographical Markets
With its wealthy population and thriving economy, a place like Silicon Valley might appear to be a safe place to invest in terms of long-term gains. However, what happens if the tech sector takes a downturn or the region’s most prominent companies decide to relocate?
You might want to look for regions with diverse economies and a growing population if you want to stabilize your real estate portfolio. During economic slumps, the real estate markets in these regions are unlikely to suffer as much as areas that depend on just a few industries. A diverse job market is a strong indication that a geographical market is a smart place to invest.
Partner with the Right Professionals
You shouldn’t underestimate the value of building an expansive network of industry specialists. Also, you should remember that the job of your real estate agent is to help you find and buy homes you like, not to protect your financial interests. A real estate consultant, on the other hand, can offer invaluable financial and investment advice based on their industry experience, analytical skills, and vast networks. You should also build connections with local property managers; you might not always be able to directly oversee the management of investment properties located beyond your local area. Plus, the larger your network, the more opportunities you’ll find.
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