For many top investors, adding land to an already robust portfolio is the perfect way to diversify and capitalize on market fluctuations. In our latest blog, we will discuss how to use land investment to diversify your portfolio in Arizona.
As the old adage goes, you shouldn’t put all of your eggs in one basket. This couldn’t be more true than when it comes to real estate investment. Real estate markets can vary widely. Having investments in multiple locations and of different types will help to ensure you ride out any market changes.
How Important is Diversification?
Diversification is what will allow you to be profitable and resilient during any market change. The risks of a portfolio filled with similar properties are far too great for most investors. To see the most profit, you will want to vary your assets, shifting your focus with the market. A well-balanced portfolio might contain rental properties, fix and flips, a commercial building, untouched land, and a second home used for vacation and recreation. Each one of these property types would make up approximately 20% of the total real estate portfolio. An investor could have 60% of their money in real estate, 30% in stocks, and 10% in other investments. This is just an example of a diversified portfolio. When you decide to invest, pick the areas that work the best for you!
Consider Different Property Types
You can diversify a real estate portfolio using land. And you can take it one step further by adding different types of land investments. You might think all patches of dirt are the same, however, zoning restrictions delegate what exactly you can do with the land. You might consider:
- Commercial land in an up-and-coming area – Develop the land, lease it for parking to a nearby business, or sell when the land appreciates.
- Rural Land – Hunters, farmers, off-road enthusiasts, and nature lovers will all lease large areas of land for their own personal enjoyment.
- Farmland – This can be rented out to local farmers based on a seasonal basis.
- Traditional Building Lots – You can choose to build a house, resell the land right away, or hold until the land is in high-demand.
The Built-In Security Buffer
The wonderful thing about real estate is that when something happens in one market, it doesn’t necessarily happen in another. You might find one neighborhood leveling out, while another one is booming! By diversifying not only your property types but also your location, you will ensure you won’t get hit too hard if property values in one area drop. Look for properties in up-and-coming areas. You will be able to capitalize on the rising land prices with little to no effort on your behalf.
So What Is Your Investing Style?
What kind of commitment are you ready to make with your Arizona land investment? The good news is that when you invest in land, the maintenance and overhead is very low. With many lots, all you have to do it let the land sit there and watch it grow in value. There will be property taxes as well as costs to clear out of control vegetation, however these costs are minimal as compared to other types of real estate. With land, you can choose to buy and flip, buy and develop, or buy and hold. Give us a call any time and we will help you find the piece of land that is right for you!