At present, most people do not invest their money properly. According to El Economista (2020), in Spain, for example, 40% of families concentrate their savings on deposits and cash, with almost zero profitability. Meanwhile, 77% of those who do invest do not use a strategy that allows them to diversify investments.

Real Estate Investments: What Is Wealth Diversification?

Wealth diversification is a strategy for diversifying financial assets in real estate investments in Miami. This consists of expanding the portfolio in different types of investment, in order to reduce the exposure of capital to natural risks in the market. In popular slang, it’s about “not putting all your eggs in one basket.”

Now let’s look at a practical example. Imagine you invest all your money in shares of a large electric vehicle company. The following month, a government agency discovered security problems in the software of cars made by the company.

Naturally, consumer confidence declines and stock values plummet. Consequently, you lose 40% of your total wealth in a single week! But there is something you can do to avoid it: implement a good wealth diversification strategy.

In this sense, Banco Monex (2018) explains that the benefits of diversifying investments are the following:

  • Mitigate investment risk.
  • Set investment objectives.
  • Improve performance and protect your assets from changing exchange rates.
Diversifying Real Estate Investments in Miami: Benefits

Real estate assets to diversify investments

Real estate investment is one of the safest and one of the fastest growing sustained. Lalaine C. Delmendo (2020) reports that home prices have increased for 102 consecutive months. This makes investing in real estate a perfect alternative in your effort to diversify investments.

In this sense, Mor Zucker (2020) recommends applying diversification even within the category of real estate investments. Diversify your portfolio by property type and location. In this way you can create a portfolio geared towards both long-term appreciation and monthly income.

Consider buying a home for sale in Miami for rent and investing in a property under construction, for example. And remember: investing in real estate offers the following advantages:

  • It allows you to get cash flow while the value of your property grows every year.
  • You get financial leverage. That is, you can use your property as collateral to get a loan that will grow your investment.
  • Access a real estate investment trust (REIT). This further reduces risk and you can focus on continuing to grow your money, rather than managing your property.

Miami: an excellent option to diversify real estate investments

Miami is one of the best options to diversify your portfolio with real estate investments. In fact, Delmendo explains that the city of the sun is one of the 10 metropolitan areas in the United States where the price of housing increased the most in 2020.

Miami has the perfect real estate investment scenario. It attracts more and more employees from other areas, which translates into an increase in the demand for accommodation in Miami. Another ingredient is the constant increase in the flow of tourists. Likewise, the average 20-year fixed mortgage rate is at its lowest value in history: 2.83% (Merrill, 2020).

Tips for diversifying real estate investments in Miami

Here are three tips for diversifying investments in Miami:

  1. Buy apartments in Miami in different geographical areas. If you are investing in several properties, consider different areas. Buying an apartment in Brickell to rent is a good idea. This area has the highest average rent in the entire state (San Juan, 2019).
  2. Consider different types of property. In this way it takes advantage of an eventual high demand in Townhouses or protects itself from a bad season in commercial areas.
  3. Seek expert advice. Having an advisor helps you increase your return on investment (ROI). Real estate professionals know the areas where they most seek to rent an apartment in Miami. In addition, they provide advice regarding the desirability of any other form of real estate investment.

By diversifying investments you reduce market risks that may affect the value of your assets. In that sense, real estate investment is the best refuge against financial risks. It provides cash flow while increasing the value of your properties. Investing in Miami is an excellent option to achieve the wealth diversification that every investor dreams of.

References

Delmendo, L.C. (October 1, 2020). Wow! U.S. Housing market sizzles, despite pandemic. Global Property Guide. Retrieved from https://www.globalpropertyguide.com/North-America/United-States/Price-History#:~:text=The 20S 26P 2FCase 2DShiller %20seasonally,to%%20S%%26P%2FCase%%2FCase%.

The Economist. (July 28, 2020). Diversifying, the key to managing wealth well. Retrieved from https://marcas.eleconomista.es/deutsche-bank/noticias/10677504/07/20/Diversificar-la-clave-para-gestionar-bien-el-patrimonio.html

Merrill, T. (2020). Miami, FL real estate market trends & analysis (Update 2020). Retrieved from https://www.fortunebuilders.com/miami-real-estate-market-trends/

San Juan, R. (October 3, 2019). These are the 10 most expensive zip codes to rent homes in Florida. Miami Herald. Retrieved from https://www.elnuevoherald.com/noticias/sur-de-la-florida/article235753802.html#:~:text=Seg%C3%BAn 20un 20estudio 20nacional 20de,y 20el 20downtown%20de%%20un%%20nacional%%20el%. Zucker, M. (September 21, 2020). Should your diversity or specialize your real estate portfolio. Forbes. Retrieved from https://www.forbes.com/sites/forbesrealestatecouncil/2020/09/21/should-you-diversify-or-specialize-your-real-estate-portfolio/?sh=15e660b17cbf