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3 Ways to Minimize Risk in a Real Estate Portfolio

Coin Graphs with Model HomesInvesting in single-family rental properties can indeed be an inherently risky business. Despite that there are ample opportunities to create a great profit, there are likewise quite a lot of things that can easily go astray. The good news is that there are a lot of good ways to reduce your risk without ending up with a less-than-profitable rental property. By knowing the top three ways to minimize the risk in your real estate portfolio, you could more cautiously keep your investments away from many different hidden problems of rental property investing to reduce your risk.

Invest in Different Locations

Among the best ways to protect your real estate portfolio from downturns in any market is to grow and spread out outside of a single location. New technologies and platforms have made it more manageable than ever to invest in properties in almost any part of the country. And, when you partner with a trusted property management company like with Real Property Management Uintah, you can productively have rental homes anywhere from Duchesne to properties that are hundreds or even thousands of miles away. In this way, you can fan out the market-related risks and determine investment properties in some of the nation’s hottest markets both at the same time.

Buy Value

Another excellent process to mitigate real estate investing risk is to “buy value.” Value investing means finding properties priced below market value. In the single-family rental home market, this could be as straightforward as searching for underpriced properties. But, in actuality, there are many other ways to think about value. Having a rental house with rental rates that are lower compared to the existing market rate extends a good time to raise rents and secure your cash flows.

One other option is to go in search of a property that, with various inexpensive improvements or supplementary services, could bring up the property’s value or tenant appeal (or both). Conclusively, keeping a close eye on future developments and buying in areas before housing prices start to climb could be other methods to make sure that your investment will offer you stable returns for many more years.

Secure Favorable Financing

Concerning financing, there are so many things you could do to seriously reduce risk. Spending for a higher down payment can, in many cases, considerably reduce your interest rate and monthly mortgage payment. Conceding that you have the cash on hand, this is a suitable practice to keep future costs low and protect your investment as a provision for real estate market fluctuations.

Another alternative is to find lenders who could grant you favorable terms or more creative financing options. Establishing creative financing solutions can oftentimes set off lower interest rates and, hence, greater cash flow. For example, if you plan to hold a property for less than ten years, you might benefit from an Adjustable Rate Mortgage (ARM). ARMs usually are associated with a lower initial interest rate, thereby improved cash flow for you. On a final note, immediately when interest rates drop, take into consideration whether it is an appropriate moment to refinance higher-interest loans.

In Conclusion

By investing in diverse markets, consistently purchasing with an eye toward value, and getting your financing to work for you, you can substantially reduce many of the risks that are associated with investing in single-family rental properties.

And when you’ve secured a property or two or three, make sure you have a first-rate property management team on your side. To understand more, call 801-889-1517 to talk with a Duchesne property manager today.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.