Diversify Your Real Estate Portfolio by Staying on Top of these 3 Market Trends

Posted by Michael Miller on January 11, 2019

Diversity is the key to a successful business in many fields. Real estate investors can take advantage of new opportunities, diversify their portfolios, and increase profits by following the top real estate investment trends for 2019.

1. Partner with Builders to Invest in Master-Planned Communities

While investors can still profit from rebuilding and revitalizing communities by purchasing fix and flip and single-family rentals, the housing shortage has led to an upswing in new construction.

Investors who diversify their portfolios with new homes or build-to-rent properties will tap into a lucrative market, where homes in master-planned communities rent for 15 to 30 percent more, on average, than stand-alone counterparts. Upfront costs may be higher, but experts say that landlords and investors will save time and rehab costs. You might pay more for new construction, but new properties will come with a warranty and be ready to rent or flip immediately at highly profitable prices.

Additionally, single-family properties continue to be in high demand for investors and primary buyers alike, driving up costs and leading to bidding wars. By partnering with builders, investors can cash in on new construction without the hassles associated with finding and closing on existing properties.

2. Consider Micro-homes, Which Meet the Need for Affordable Housing in High-Rent Regions

In cities like New York, San Francisco, and Washington D.C., micro-apartments under 400 square feet are filling a need for affordable housing. Escape Tiny Homes, a Wisconsin-based manufacturer of sub-500-square-foot homes, has reported a 200 percent business growth in the past few years.

There is no escaping the tiny house movement, and smart investors can diversify their portfolios by “thinking small.” As we first reported in 2017, micro-MDUs in expensive urban areas often yield rents as high as their full-size counterparts, with fewer upfront or operating costs. Perhaps best of all, by providing excellent service to tenants, investors can establish a customer base for fix and flip home sales or single-family rentals when tiny home and micro-MDU tenants outgrow their space.

3. Ride the Wave of Single-Family Rentals

If your investment portfolio consists entirely of fixing and flipping homes for profit, it would be wise to make 2019 the year to explore single-family rental opportunities. Single-family rentals represent 35 percent of all tenants, today, and is the fastest growing market segment, outpacing both MDU rentals and single-family home sales.

A shortage of homes for sale, combined with a growing demographic of middle-income millennials who prefer to rent rather than buy, make the SFR market one of the most profitable for investors. Whether you embrace the growing build-to-rent trend and become a landlord in one of the country’s many fast-growing master-planned communities or decide to hold and rent a property instead of fixing and flipping, SFRs provide ongoing, steady income in a highly competitive marketplace.

Make Plans to Diversify

Real estate investors have more opportunities—and avenues—than ever before to rebuild and revitalize communities and provide homes for a variety of demographics. How will you diversify your real estate investment business in 2019? It is time to put your plan to work.

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