Diversification and Real Estate Niches

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Everyone knows you aren’t supposed to stick all of your eggs in one basket. This is very important for real estate investors. Solely investing in one type of property severely limits your chances of continued success as the real estate market shifts. Many investors found this out with the most recent real estate bubble burst. However, having too many types of investments makes it extremely more difficult to manage and maintain your investment portfolio on your own.

Most beginning investors will choose to find a niche or a target area to focus on. It prevents the investor from spreading himself too thin. This is a great strategy as long as the investor remembers to add at least one other type of investment property to the mixture. This way he is not limiting his options for future success.

The majority of real estate investment opportunities fall into one of three categories. These are cash flow, equity and appreciation, and assignments.

Cash flow includes all of the real estate investments that create regular monthly income for you. These include rental houses, lease to owns, apartments, vacation rentals, short term rentals, etc. The advantages to cash flow investments are they bring immediate monetary sources to the scene and continue to do so over time. The rate of return on the investment is determined by how high the rent is set and how much the is left over after the mortgage and other property expenses are paid. The better news is rental properties can eventually be sold once, especially after they have appreciated.

Equity and appreciation are two separate items that involve property that is purchased and held onto. Equity is the amount that the home is worth that is greater than the amount owed on the home. Appreciation is when the property value of the home or other type of property increases. This can happen slowly over time or very quickly with renovations. Examples of this type of real estate include vacant property, prebuilt construction areas,  pre-foreclosures, residential properties, and commercial properties.

Assignments are a scary part of real estate. In this controversial type of investment, a real estate investor finds a property and before he buys it, he finds another buyer to buy it from him for slightly more than the original amount. The investor pockets the assignment fee or difference in values. Legally, the investor is supposed to inform the seller of his intentions before he makes the offer. However, this very rarely happens.

Find your niche and you will see your profits grow. For more information on real estate investing, call or visit us today at HomeVestorsfranchise.com. We have a vast array of real estate investment and real estate franchise opportunities available. Come let us help you grow your real estate business.

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