Rahul Arora


Building A Real Estate Portfolio

I've got some savings stashed up neatly in the bank, so should I use to invest in a property or should I not take the risk and let the money sit idle in the bank? This has got to be one of the most common questions in real estate investing.

While investing in real estate may give someone collywobbles/dithers, it is, however, one of the most compelling markets to enter.

'Ninety percent of all millionaires become so through owning a real estate. The wise young man or wage earner of today invests his money in real estate.’

Real estate profits have far outrun profits from other industries combined together. But it doesn’t mean jumping ship and starting something new just because you’ve decided. Play to your strengths and gain some knowledge of the field. For a majority of people, owning an extensive investment is a part of their dream. But no-one has actually got rich by investing only in one type of real estate.

As quoted by the famous Australian Financial Analyst and Publisher, Paul Clitheroe:

“Before you start trying to work out which direction the property market is headed, you should be aware that there are markets within markets.”

A real estate portfolio is a collection of different investment assets that are held and managed to achieve a goal. While there are numerous ways to invest in real estate, understanding the market demographics and the nature of the business environment is a must for a smart investment.

Building a diversified real estate portfolio is a smart way of accelerating long term wealth while mitigating for foreseeable risk. If the investments are spread across a broad spectrum, the loss in one is nullified from another, thus reducing the risk. It restricts dependence on the highs and lows of a single market and enhances the rewards. A well-curated and maintained portfolio showcases your financial strength and your personal investment goals

Before we begin with a guide to building a diversified real estate portfolio from scratch, let's look at some of the factors that drive the market and should drive your decision as well:

  1. Objective

Each transaction should be governed by an objective and should be within the framework of your final goal. As different investments perform differently, it’s critical to understand the end goal before going for the investment.

      2.  Asset Allocation

It is always ideal to create an appropriate asset allocation model for your investment. You must select such a combination of assets that not only foresees the highest profitability but is also within the framework of your risk-taking capacity.

      3.  Appreciation

Your real estate portfolio must be designed in a way that it gives you long term value appreciation. Stagnant investment is equal to zero investment. Weigh your investment with returning value and let not investment outweigh returning value.

Real estate investments offer an excellent high-value risk-return profile. Thoughtful consideration of the factors mentioned above will enable investors to reap the benefits while mitigating the risks.

Here's how you can reduce the risk associated with your portfolio and become a diversified investor:

  1. Investment in Residential Real Estate

While investing in property may not seem like a cake-walk, it has multiple benefits to its name. And with residential real estate becoming a multifaceted concept, it has shown feasible returns in the past trends. An investor can choose from several alternative residential real estate; service apartments, co-living, senior living, etc.

Moreover, given the price appreciation and rental income which increases with time, residential property is an investment that moves in tandem with inflation.

Yes, investing such a vast amount may seem scary in the beginning but as they say in real estate;

“Don’t wait to buy a real estate, buy real estate, and wait.” Patience, efforts, and careful market study can be extremely beneficial. 

      2. Investment in Multifamily Properties

These multi-dwelling units are one of the most compelling investments. A kind of residential housing with two or more units to accommodate more families under one roof, they bring more substantial sum of cash flow and reduce the dependency of rent on one family alone.

Vacancies can entail a series of rental expenses associated with real estate investing. However, in a multi-family dwelling, even if one tenant moves out, the rent collected from other tenants help to cover the expenses easily. The risk of loss of income from an empty apartment is balanced out by income from different other tenants.

Build Long Term Wealth

  1. By Leveraging Home Equity

An ideal way to make your residential property investment a lucrative one is by building home equity to your advantage. By increasing your home’s value or by reducing the mortgage debt on it, you can make home equity a great asset. In fact, through careful financial planning, you can use your home equity to consolidate debt and make further investments as well

      2. By Encouraging Savings

While there are many options for novice investors to get into real estate, self- funding would be the best route further. As an investor, you should get your finances in order. Keep your investment simple and as debt-free as possible by emphasizing on savings.

If you notice that your investment is becoming stagnant and not yielding you satisfactory returns, you have to option to refinance. Take your money out from that property and invest it in another. Plan, strategize, and keep yourself free of the debt burden. Look for avenues that guarantee high returns and lower risks. You can also lower your risk with the help of Rahul Arora - Real Estate Professional. Before looping in the opportunity, contact us for expert guidance. Invest wisely, invest smartly.