September 7, 2024
Real estate investment is and will be a major channel to increase wealth. Investors who invested in real estate in the 90s and early 2000s have earned unbelievable returns. Even today, it is one of the best ways to invest as the industry continues to grow rapidly. And with the growth the industry is becoming more complicated offering many avenues for investors. In such a scenario, one must diversify their real estate portfolio to get the maximum benefit. Diversification reduces the risk and improves the return on investments.
This blog discusses how real estate investment can be diversified:
Investors can consider the many types of residential real estate. Single-family homes, apartments, penthouses, multi-family units, townhouses, independent villas, bungalows, and many more. Depending on the budget available, investing in different types of residential properties can improve the returns and reduce risks. Property like apartments and single-family homes have low maintenance costs and give steady rental returns. Meanwhile, properties like villas may need greater maintenance and higher returns.
The Indian real estate market is expanding like never before. Although the metros and large cities have the best scope for investment, the focus will very soon shift to Tier 2 and Tier 3 cities. Investing in different locations with the potential for future growth and in large cities where the rental returns are steady and improving can diversify their portfolio. Within cities too, one can invest in prime, mid-segment, and affordable locations. This can mitigate risks if one of the segments underperforms and the other one performs well.
The different stages of real estate investing offer different benefits of investment. Properties in the pre-construction stages have lower prices compared to the market and often provide freebies. They can give good returns after completion. Newly constructed properties come at a premium but can get immediate rental returns. Resale properties can bring in steady rentals but may need renovation. If the property is old then the chances for redevelopment increase and can give better returns in future.
For those who want to be a part of real estate portfolio growth but do not have the funds to buy property real estate instruments are a good option. Investors can consider these to diversify their portfolios as these instruments invest in the real estate industry. Real estate Investment Trusts, real estate mutual funds, and crowdfunding platforms are important avenues to explore.
Diversification is a means of reducing risks and maximizing returns. Investors must do the necessary homework before investing their wealth in different property types and instruments.
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