Safe Investing: Reducing Risk in Your Real Estate Portfolio

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June 18, 2018 Investment Decision

The Bangladesh real estate market is experiencing record levels of growth and foreign investment, contributing more than eight percent towards the nation’s GDP. While investing in real estate can yield high returns, it also poses risks. You may lose money due to property damages, debt maturity, legal disputes with tenants, and much more. When investing in real estate there’s no way to eliminate risk completely, but fortunately, there are steps that you can take to give yourself a greater degree of financial protection.

Do Your Research

Business magnate Warren Buffett once claimed that “risk comes from not knowing what you’re doing.” This is true when investing in any market, including real estate. Before taking the plunge and investing in a residential or commercial space, it’s essential that you make sure it’s a smart long-term decision. There are a couple of steps that you should take to learn about a property, including:

● Hiring a third-party due diligence firm to conduct an environmental site assessment
● Quantifying capital expenditure needs to project ROI
● Shopping around for property insurance quotes
● Getting quotes for necessary property management services such as lawn care, trash collection, and more
● Contacting the concerned personnel to learn about your property tax bill
● Checking the background of the property seller/ developer to ensure reliability

In addition to contacting the proper authorities regarding quotes and reports, you should also conduct your own market research. Commercial properties should have data published and available to the public, but this may not be the case for residential properties. Instead, you may have to look at neighboring lots to get an idea about things such as rental rates.

Diversify Your Investments

One of the best ways to reduce risk in your real estate portfolio is by investing in multiple properties in different locations. While more lots may be a challenge to manage, this strategy ensures that you won’t go broke if one property fails. A mix of commercial and residential properties can help to protect you against fluctuations in either market. Buy-to-let buildings are also a good investment, as they give you two separate ways of earning money. You can make a profit both by charging rent and through capital growth depending on where the property is located.

While real estate investments can be lucrative, without taking proper precautions, you may find yourself losing money. It’s critical that you protect yourself financially and take steps to reduce risk in your investment portfolio. With sufficient time and effort, you can create a solid investment strategy that offers impressive returns.