Diversification of Your Real Estate Assets

BY Bob Waun

Real Estate Diversification 101

Your grandfather told you "don't put all your eggs in one basket".
Your stock broker tells you to "diversify".
Your common sense tells you "real estate is regional, when one market is hot, another is not".

Diversification of your real estate portfolio is an essential to a stable plan. But when real estate is regional, how can you best diversify? Owning and managing rental properties in vastly different and distant markets is not always practical. Finding good deals in markets far-flung from your home market is not easy.

Condo hotels may prove to offer a solution to the management hassle, and diversifying in vastly different markets may enhance rental income potential. Condo hotels are a popular new way of owning a whole-ownership condo within a commercially operation hotel. Picture a hotel suite or junior condo within your favorite hotel brand, in a desirable second home destination. The condo is rented by hotel management when the owner is not in residence and the income from the rental is split with the hotel and condo owner. The hassle of rental is taken away from the condo owner, so owning multiple condo hotel units in vastly diverse places is easily accomplished.

Take for example one of my clients who has purchased a Northern Michigan condo hotel and a condo hotel unit in Miami. The best rental season for Northern Michigan is summer months, but this is the worst season for S. Florida. In reverse in the winter months Miami is at nearly full occupancy and rental rates, and Northern Michigan is nearly vacant. The diversification strategy evens out cash flows and allows the condo owner to own 2 great condos with no hassle, and in the best seasonal locations.

Many baby boomers are turning to condo hotel for retirement housing options because the definition of a second or third home is a home in which we spend less than full time. So why have a traditional condo that is either a rental hassle or a vacant financial drain on your resources?

The ideal of real estate diversification is an achievable, noble goal and can be made possible by utilizing the condo hotel structure.

Bob Waun is CEO of Vacation Finance, America's First Second-Home Lender www.vacation-finance.com which specializes in financing unique second home alternatives.

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