There are many different
ways to invest in real estate, but the most commonly known method involves
purchasing and renting out residential properties — be it apartment complexes
or single-family units. However, this has become difficult as of late because of
the pandemic. Case in point: 9News’s article on the state of Airbnb in Australia reports a steep decline in the market’s
revenue. Given that 200,000 of the listings are investment properties, Airbnb
landlords have had to look for other means of income.
One way of avoiding major
revenue loss is to diversify your real estate investment portfolio. By doing
this, it helps you withstand economic downturns or even depressions. So, here
are a few ways you can go about it:
Diversify by Property
Type
There's a wide array of
property types to invest in, so a simple way to diversify is to branch out from
residential units. Commercial real estate includes retail shops, offices, and
even hotels. These are ideal investments for areas with booming business
districts and an active tourism industry. Case in point: Australia's commercial real estate market is expected to bounce back, but with far less focus on
retail. Instead, commercial properties will be turned into childcare,
healthcare, and data centre properties.
There are also industrial
properties which consist of manufacturing buildings and warehouses. Investors
with connections to delivery companies would be wise to invest in the latter.
Lastly, there’s land, which is a lucrative investment, given that it can never
really depreciate. So, simply holding on to it and selling it at a later date
can grant you a hefty ROI.
Diversify by Location
Another way to diversify
your portfolio and protect your income streams is to invest in multiple
locations. Investing in one area is a recipe for disaster because if the local
market declines, your income will as well. Melbourne was one of the worst hit
property markets because of its extended lockdown, while the Brisbane market
remained relatively strong. As such, it’s best to invest in properties in
different areas, even in different countries, if possible. This lowers the risk
of having all your real estate investments suffering from the same economic
downturn.
Expand to Investments
Outside of Real Estate
Apart from diversifying
your real estate investments, it would also be wise to invest in markets
outside of real estate. This provides you with alternative sources of income
should the property market fall.
Real Estate Investment
Trusts (REITs)
While still linked to the
real estate market, REITs allow you to invest in real estate companies. Unlike
with traditional property investment, you don’t end up owning the property and,
instead, take a share of the real estate company. This is an excellent way to
indirectly invest in real estate, and avoid the hassles that come with
maintaining properties.
Foreign Currencies
The foreign exchange market
is another profitable avenue for investing. This is partly due to its size and
the fact that the values of currencies never drop to zero. Using various tools
available, even the average currency investor can turn a healthy profit. The trading heat map tool on FXCM shows how the Australian dollar performs against other
currencies. This type of tool can help investors pinpoint trends in currency
pairs. This, in turn, leads them to make informed trades.
Stock Market
Investing in the stock
market works a lot like REITs, except it isn’t limited to real estate
companies. Here, you can purchase shares from different companies. In return,
you get a portion of that company’s profits. An article on Bloomberg mentions the use of demo accounts to learn about the market. Utilising these trading demo
accounts is a great way to learn the ins and outs of stocks without the risk of
losing capital.
As you can see, you’ve got
a lot of investment options to choose from. But if you still have doubts, check
out another one of our
articles on RealRenta, which
delves into why Australians think that it would be wise to buy an investment
property now. It’s not surprising to see why considering the record low-interest rates and house prices. So, what are you waiting for?
RealRenta has all the
tools that a property manager has, but at over ¼ the cost of a property manager.
Join now and the cost is
less than a cup of coffee a week to manage your rental property
RealRenta also has a
free vision, so why not check it out
Rhyan Jeal
Friday, 5 February 2021
