Smart real estate investors are always learning. If you’ve been paying attention to the sales market and the rental market over the last few years, you’ve probably noticed that trends are more defined and they’re not always predictable.
You may also have learned that it’s essential to diversify your Charleston property portfolio.
There’s more opportunity than ever for real estate investors who want to earn high rents in the short term and solid appreciation in the long term. There’s also more risk. You need to be prepared.
Here’s why you should diversify your Charleston property portfolio.
Diversification Helps You Grow a Portfolio
Owning one rental property is a great way to earn some income and allow an asset to grow in value. Owning two rental properties increases what you’re able to earn.
To access real wealth, however, you have to keep growing. When you have a balanced portfolio with a mix of different types of assets, you can grow faster because you have different investments that are succeeding independently of each other.
Buying a single-family investment property, for example, allows you to earn more rent because they typically rent for more than an apartment.
Buying a small apartment building with multiple units will require more money out, but you’ll also have several different income streams.
Your math is different with each property.
It’s possible to diversify with asset classes, but it’s also possible to diversify by buying rental properties in different geographical locations. If you mostly invest in Virginia or Florida, why not consider the Charleston market? It provides you an opportunity for growth outside of your current markets.
Limit Your Risk with Diverse Real Estate Assets
Perhaps the best reason to diversify your real estate portfolio is that you’re able to avoid a lot of the risk that comes with having all of your money wrapped up in a single market or a single property type or asset class.
Let’s say you own three single-family homes in a specific neighborhood. If that neighborhood begins to deteriorate or it becomes largely commercial or a new highway is zoned to run right through it, you’re going to see your property values decrease and your tenants look for other places to live.
But, if you own homes in various neighborhoods or even different cities, you’re protected from the downturn that a single area can experience. You have other assets in better locations.
Here’s another example. If you rent out a single-family home and that tenant moves out, the vacancy completely dries up your rental income. There’s nothing coming in, even while you’re paying out of pocket for maintenance, landscaping, cleaning, and the cost of re-renting the home. With a building or a set of multi-family units, you have several different rent checks coming in every month. One tenant moving out isn’t as devastating to your cash flow.
You would never put all of your money into a single stock. You shouldn’t keep all of your real estate holdings in a single property or property type, either. There are several ways to diversify your real estate portfolio, and we’d be happy to show you how you can best position yourself for growth and risk management. Contact our team at Charleston Home Rentals.