Diversifying real estate investments helps lessen the impact of market downturns, Elliot Adler advises.
SAN DIEGO, CALIFORNIA, September 17, 2022 — Hopping into real estate investment can seem intimidating, particularly if there is no interest in personally managing properties. Elliot Adler, San Diego real estate investor, advises there are a lot of ways to benefit from real estate with a less hands-on approach.
While traditional pathways of investing, such as managing rental properties, remain popular, more investors are turning to unique instruments, such as trusts and mutual funds, to diversify a portfolio with real estate.
Elliot Adler offers ideas on investment paths
Direct investment is the most traditional path for real estate investment. It involves purchasing properties either individually, as a business or as part of a partnership and then earning rental income from leases to individuals and other businesses.
Another common way to direct invest is the fixer-upper, which is now referred to more frequently as flipping. In this scenario, an investor purchases a house with the intention of completing repairs and upgrades to resell the house at a higher price.
For some properties, repairs are needed to bring the property up to code where it can pass an inspection and qualify for a traditional mortgage. Other properties may be structurally sound but completely outdated and able to sell for a lot more with modern fixtures and other amenity upgrades, Elliot Adler advises.
Newer options, such as online real estate crowdfunding sites, are also making it easier for groups of investors to connect and partner resources to secure larger deals with real estate developers. This can make it easier to diversify the portfolio but hampers liquidity.
Real estate investment trusts are an interesting way to engage in real estate without day-to-day managing.
REITs are commonly used as a hands-off option, and they can be explored using funds in tax-advantaged accounts, such as a 401(k) or health savings account.
Many have diversified holdings, such as shopping centers, office complexes and other larger investments many individuals could not afford separately. This diversification also helps provide a buffer against some economic downturns.
Elliot Adler offers these investment options are also very liquid compared to traditional real estate as they can be traded or sold like stocks without the hassles of real estate sales and the associated costs.
A real estate mutual fund is another investment option, and they often participate in real estate investment trusts but also branch out into stakes in real estate operating companies and other opportunities.
With access to additional real estate options, the portfolio is further diversified. A mutual fund is professionally managed to provide even greater guidance for shy investors but is also subject to fees. However, these are clearly disclosed and can be weighed against potential profits prior to investing.