How to Diversify Your Real Estate Investments

There are many different ways to invest in real estate, but the most commonly known method involves purchasing and renting out residential properties — be it apartment complexes or single-family units. However, this has become difficult as of late because of the pandemic. Case in point: 9News’s article on the state of Airbnb in Australia reports a steep decline in the market’s revenue. Given that 200,000 of the listings are investment properties, Airbnb landlords have had to look for other means of income.

One way of avoiding major revenue loss is to diversify your real estate investment portfolio. By doing this, it helps you withstand economic downturns or even depressions. So, here are a few ways you can go about it:

Diversify by Property Type

There's a wide array of property types to invest in, so a simple way to diversify is to branch out from residential units. Commercial real estate includes retail shops, offices, and even hotels. These are ideal investments for areas with booming business districts and an active tourism industry. Case in point: Australia's commercial real estate market is expected to bounce back, but with far less focus on retail. Instead, commercial properties will be turned into childcare, healthcare, and data centre properties.

There are also industrial properties which consist of manufacturing buildings and warehouses. Investors with connections to delivery companies would be wise to invest in the latter. Lastly, there’s land, which is a lucrative investment, given that it can never really depreciate. So, simply holding on to it and selling it at a later date can grant you a hefty ROI.

Diversify by Location

Another way to diversify your portfolio and protect your income streams is to invest in multiple locations. Investing in one area is a recipe for disaster because if the local market declines, your income will as well. Melbourne was one of the worst hit property markets because of its extended lockdown, while the Brisbane market remained relatively strong. As such, it’s best to invest in properties in different areas, even in different countries, if possible. This lowers the risk of having all your real estate investments suffering from the same economic downturn.

Expand to Investments Outside of Real Estate

Apart from diversifying your real estate investments, it would also be wise to invest in markets outside of real estate. This provides you with alternative sources of income should the property market fall.

Real Estate Investment Trusts (REITs)

While still linked to the real estate market, REITs allow you to invest in real estate companies. Unlike with traditional property investment, you don’t end up owning the property and, instead, take a share of the real estate company. This is an excellent way to indirectly invest in real estate, and avoid the hassles that come with maintaining properties.

Foreign Currencies

The foreign exchange market is another profitable avenue for investing. This is partly due to its size and the fact that the values of currencies never drop to zero. Using various tools available, even the average currency investor can turn a healthy profit. The trading heat map tool on FXCM shows how the Australian dollar performs against other currencies. This type of tool can help investors pinpoint trends in currency pairs. This, in turn, leads them to make informed trades.

Stock Market

Investing in the stock market works a lot like REITs, except it isn’t limited to real estate companies. Here, you can purchase shares from different companies. In return, you get a portion of that company’s profits. An article on Bloomberg mentions the use of demo accounts to learn about the market. Utilising these trading demo accounts is a great way to learn the ins and outs of stocks without the risk of losing capital.

As you can see, you’ve got a lot of investment options to choose from. But if you still have doubts, check out another one of our articles on RealRenta, which delves into why Australians think that it would be wise to buy an investment property now. It’s not surprising to see why considering the record low-interest rates and house prices. So, what are you waiting for?

RealRenta has all the tools that a property manager has, but at over ¼ the cost of a property manager.

Join now and the cost is less than a cup of coffee a week to manage your rental property

RealRenta also has a free vision, so why not check it out


Rhyan Jeal
Friday, 5 February 2021

Join our mailing list Receive Free Property Tips and news

Now Partnered With


Contact Us

1300 11 RENT (7368)