Everyone from your parents to your financial advisor has told you not to put all of your eggs in one basket. Why should real estate be any different? Diversification is important with any investment, real estate included. Think about this. Say you bought all of your investment homes in a place like Detroit. Detroits population continues to rapidly shrink as factories close. In fact, I just heard for the first time in history, building demolition there is outpacing new home starts. If all of your investment home portfolio was in Detroit, wouldn’t that be a scary proposition right now?
Most of my portfolio is right here in Memphis. That I’ll admit. However I’ve recently started buying homes in Charlotte, NC, in addition to some international real estate investing that I”ve done. Now the old saying goes; “a rising tide lifts all boats”. If this is true, then the opposite is also true. When the market is down, despite real estate’s localized dependency, real estate everywhere seems to dip. So of course there is no guarantee. But you are better protected by having a diversified portfolio. This is especially true when you factor in purchasing largely suburban homes with 3 bedroom, 2 bathrooms, and 2 car garages. In doing so you can add a degree of diversification and automation at the same time.
So prior to buying that next investment home, think about where it should be located.
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