The Hampton Roads metropolitan area is one of the fastest-growing regions in Virginia. Supply is driving the housing market, and property value is swiftly rising, making it a conducive time for investing in real estate.
However, to achieve maximum return on investment, you need to minimize risks and enhance your returns. One of the best means to ensure fixed returns for your investments is by diversifying your Hampton Roads real estate portfolio.
Diversifying your property portfolio refers to the strategic distribution of assets and investments across the market. Due to the volatility of the housing market, it is more practical to spread out your investment across a varied range of assets.
You can diversify your Hampton Roads rental property portfolio in the following ways.
Increase Geographical Extension
Investing in assets across different locations is one of the best ways to diversify your investment and protect it from the risk of market volatility. Many investors focus on investing in assets in a single market due to their accessibility. However, this poses risks to the investments. By investing in assets in different markets, you can ensure that not all of your properties are at risk if the demand of a specific area falls.
Target Versatile Asset Classes
You can invest in different asset classes such as single-family dwellings, multi-family residences, or commercial units. It can help you maximize your returns as various segments of the market perform differently. It also minimizes the risk by not limiting your investments to one asset class.
Invest In Diverse Risk Profiles
It refers to how much potential cash flow your investment property can generate. There are three different types of risk profiles in which you can invest.
Stable or core assets
These assets are simple and don't require much maintenance. They are occupied when you buy them and have rents that are close to the market rate. Therefore, these investments are very stable and have less risk. Over the long term, however, such assets can see lower returns.
Value-add properties
Value-add properties require certain upgrades and renovations to reach the market level. This might include refurbishing the place, investing more in marketing the property, and changing the revenue model. There is more risk in this strategy, but these properties can give you better returns in the long run.
Distressed assets
As the name suggests, distressed assets are properties that require a lot of work, strategy, planning, and seamless execution to meet the market rate. An upside to this is that you can obtain such properties at a lower price. The risk involved in this process is the highest, but they can have a strong ROI once they are ready for the market.
Determining a Good Asset and Distressed Asset
Any asset that involves minimal risk and steady returns at the initial level is a good asset. There are several good assets available in the real estate market in Hampton Roads. On the other hand, distressed assets are relatively less in demand. These are properties that are priced well below the market value by the current owner or manager.
Investors often acquire such assets at a low rate and implement effective strategies to secure stable and long-term profits. However, you need to rightly identify and obtain a distressed asset at the right moment to earn substantial cash flow in the future.
Significance Of Portfolio Diversification
Diversifying your Hampton Roads real estate investment portfolio can protect you from the market's potential volatility and the financial losses from your underperforming assets. It ensures a reliable growth of your funds by spreading out your investments across different asset classes and types.
A diverse portfolio can increase your ROI and can also attract potential investors, thus expanding your business. It is a good idea to take professional advice from property managers to figure out your best choices for real estate investment in Norfolk.
Doud Realty Services is a trusted property management company serving clients for over 20 years in the Hampton Roads and Norfolk regions. For more insights on how to diversify your portfolio in Virginia, connect with us.