Investment in real estate is a very common practice in the present times, however, according to experts like Ali Ata of AAIM, it is always very important to not put all your eggs in one basket. This is the reason they promote the possession of a diversified investment portfolio for all investors. So that one can how to invest in this manner, it is essential to, first of all, understand what it means to have a diversified investment portfolio.
Primarily because all kinds of investments are subject to market risks, it is only wise to invest in various different types of real estate. This is done so that the rise and fall of the market do not massively fall heavy on your investment. This is the best way to waive off the risks that are attached to such investments. One does not have to remain worried about the returns that are likely to come.
Achieving such diversification can be done by considering two factors: Geography and Class. The location of a real estate property is one of the key factors in gauging the profitability of the property. The development of the neighborhood of the real estate plays a major role in this regard. Thus investments should be made in a number of places to be able to shield oneself from any major loss.
Now, real estate can be of various classes or categories. Each class of property comes with its own terms and conditions. One could select from residential to commercial real estate. It has been noticed by veterans of the field such as Ali Ata that the risks are increased when one invests in the same class of real estate. Instead, it is always a better approach to diversify the investment in this manner.
A residential real estate property is further divided into single-family and multifamily residential real estate. Condominiums, duplexes, triplexes, and fourplexes are all different types of multifamily residential property. These are said to give a greater ROI than a single residential real estate. However, the financial status of an individual defines the investment selection.
Residential property is better when it comes to returns because it is rented out to tenants and becomes a regular source of income for the investor. But in order to be able to give it out on rent, the investor should ensure that the property is well maintained and has all the provisions to be able to make it worthy of incurring rent.
Ali Ata agrees that certainly the residential properties are attached with a certain rate of risk, yet it is one investment that will never run dry. One of the marked differences between commercial and residential property lies in the fact that the former one can be given out on a greater lease length than the latter.
Irrespective of the kind of real estate one invests in, a good return ought to be expected, particularly, if the investment is diversified.