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Diversify your portfolio with real estate

February 6, 2019 | Share:

Buying

Real estate is commonly referred to as one of the safest investments out there. Among the easiest ways to get started in investing in real estate, especially in a region like Toronto and the GTA, is through owning rental properties.

Rental properties produce a steady stream of income you can rely on monthly, which can be used in a dividend-esque way or as a way to keep your investment financially secure. Even so, rental properties do carry risk and at times, they will require additional capital to support.

The easiest way to minimize risk in a real estate investment portfolio is to diversify. If you’re ready to add more properties to your investment portfolio or are looking for a safer strategy, here are a few ways you can add some diversification.

Multi-family properties

Multi-family properties, sometimes known as multi-dwelling units, are where there are two or more units under a single roof. They are less common in residential parts of Toronto however there are some. This type of investment produces significant cash flow compared to single-family rental properties and subsequently carry less risk. That said, know you will have more rental properties needing to be managed and a vacancy could hurt your bottom line if you’re not careful.

Commercial properties

Commercial real estate in Toronto provides steady cash flow, lower risk of vacancy because you’re dealing directly with businesses, more attractive leasing contracts, and likely higher long-term income potential. Commercial real estate comes with tax breaks and can help pay off mortgages on other investments. Although there’s less competition for commercial real estate investments in Toronto, learning what the best investment is in this category can be challenging.

Real estate investment trust (REIT)

A REIT is a company that manages income-producing real estate. Akin to a stock investment, REITs offer shares to the general public however these shares are contingent on the real estate market. REITs are used in private and public equity stocks in real estate companies investing in properties, mortgages, and any other real-estate related investments. REITs can be derived from all types of income streams, diversification, and long-term capital appreciation.

After you’ve diversified your real estate portfolio, you can rest easy knowing that if any property does not yield the return you expect, you’re still protected. In Toronto, thankfully, there is a lot of development and plenty of real estate investment opportunities. There’s no shortage of options which can be used to diversify your portfolio. For any real estate investor, that’s absolutely something to look into.


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