How to Diversify Your Real Estate Portfolio

Real estate is one of the proven ways to generate wealth over a lifetime. Most financial advisors advocate wealth accumulation through real estate investments, but the current real estate market makes some people question whether they want to get into the market. The key is to diversify your real estate portfolio to make yourself less susceptible to the fluctuations of the market.

Instructions

Difficulty: Challenging

1. Invest in various time range properties. Short-term properties are rehab projects. You would take these projects, make improvements and turn them over quickly. Also consider mid-range properties, which you allow to sit while increasing in value and long-term real estate investments, or properties that you rent out.
2. Consider REITs. Real estate investment trusts are different from real estate investing in that you are purchasing shares in trusts. The managers of these trusts will purchase various properties, and your money will be tied to the performance of these properties. REITs tend toward commercial properties, giving you different market concerns from the single-family investment properties.
3. Buy in different areas. A real estate investor in New Orleans would have been in trouble post-Katrina. Other areas have natural or economic disasters as well, and these areas will see real estate values plummet. After your first couple of properties, begin investing in different areas as protection against this problem.
4. Stay steady. Many investors sell at the first signs of trouble, but that is dangerous in the real estate market. Create a plan and stick to it, or reevaluate carefully, instead of jumping ship with market changes.

Tips & Warnings

• Don't expect to turn a profit on your first property immediately. Making money in real estate works, but it takes time.