Everyone knows that the real estate market is both volatile and rewarding. This makes for a high risk high reward scenario which can be used effectively to gain considerable profits in a relatively shorter timespan.
However, playing fast and hard is not the only option in real estate investments, there are also safer and more stable options for investments which can yield a fair, if somewhat lesser return. The smartest investors in real estate always combine the best from both segments to ensure they have a reliable and rewarding investment portfolio.
If you want to enter into the real estate market of the US, then you need to know where to place your money. Here are some important suggestions by experts that will help you optimize your investment portfolio:
5 Key Real Estate Investment Suggestions to Have a Bullish 2019
1. Combine Public Real Estate Investments with Private Ones
Public REITs and other types of real estate investments are quite common. These are invested in by a lot of people including experts and novices alike. The reason for this is simple – they offer a fair return on investment which can then be turned to explore further market investment opportunities. As such, the public real estate domain has been quite popular for investors.
However, more recently, there has been an increment in the value of private real estate investments. Technically called closed-end, 40 act interval funds, these properties get a daily NAV or Net Asset Value. But they are not listed on the exchange. This means there is virtually no significant price fluctuations in this domain. This is a viable alternative to public real estate investments.
2. Find Your Agreeable Balance Between Risk and Profit
The biggest concerns for any retail real estate investor are the factors of price volatility, profit margins, risks and liquidity. Finding the right balance between these variables is the core idea behind managing any kind of investment effectively. With real estate investments, these considerations should be structured around reliable data and analysis of the same.
The idea is to invest between high risk, high liquidity assets and then pad the investment portfolio with steady income-focused investments spread across various sectors. The net yield from the latter category of investments will not offer much in terms of handsome profits. However, it will ensure that the investor can take strategic risks in selective markets where net yield potential is high and be able to mitigate the risk profile.
3. Assess Your Fixed-Flexibility Ratio
A proportionate investment distribution between stable and normalized return assets in the real estate market and flexible investments with potential for high-returns in the most desirable case. The choice of distribution proportion between these two inverse variables depends largely on the investment motive.
For example, investors looking for income potential investing in floating-rate commercial real estate credit is a strong option. This segment allows for portfolio diversification without exposing the investor to excess risk. At the same time, using investment fixed retail assets in the residential market like multi-family complexes to facilitate a steady return is an ideal investment situation.
4. Use Interval Funds Effectively
Interval funds are favored by investors who want to opt for a less liquid investment strategy. These strategies are primarily based on sticking to one strategy whereby investors can ensure a steady profile while also allowing for directional changes in the late stage market cycles. It is wise to be cautious while making such investments as changing the directional momentum of investment vehicles at later stages can reduce potential profits considerably.
5. Choose Investment Managers Wisely
Most investors would rely on investment managers to ensure they are providing their capital to the most sensible niches. The choice of real estate investment manager will greatly determine the kind of investment returns available to the investor. The best way to approach this is by selecting managers who can offer a flexible perspective wherein the preferences of the investor are given priority. Although this is something most investors will claim to do, there is a difference between being able to do and being able to do well.
Real estate investments across the retail market space should be undertaken with a balanced approach in mind. The instances mentioned above offer a perspective on how this balancing can be done using various investment vehicles. Investors should exercise discretion in all investments to ensure their capital is not squandered.