Diversifying Your Real Estate Portfolio

Posted on: June 7, 2022

Diversifying your portfolio is an important part of any investment strategy. With public markets like stocks and bonds shrinking, private investments such as real estate are a great way to increase your portfolio’s diversity. Private investments can also offer more bang for your buck. With that in mind, here are a few ways that real estate investment can create the varied portfolio you are looking for:

Residential Real Estate Investments

Investments in a residential real estate property offer great diversity opportunities. For one, an investment in a residential vacation home can grant the investor access to passive income through short-term rentals, which can yield three times the profit presented by long-term rentals. However, investment in long-term rental options, such as home or multi-family housing developments, can be a safer investment since people are always looking for more affordable living situations.

Commercial Real Estate Investments

Commercial investments, on the other hand, tend to have an inverse correlation with stock or bond prices. That means when stock and bond prices decrease, commercial real estate prices tend to stay flat or even rise. Commercial real estate investors are also aided by various firms dedicated to increasing investment opportunities for potential investors. Firms like Crowdstreet or Yieldstreet are platforms designed to match real estate firms with investors that fit their properties.  

Increasing Portfolio Diversity

So how do these increase your portfolio’s diversity? Well, for one, real estate is a tangible asset that tends to not be as affected by volatile markets as other investments. Adding that sort of asset to a stock or bond portfolio diversifies risk, which is a huge asset for investors. Additionally, both commercial and residential investments also offer passive income opportunities through rental space. Last but not least, real estate investments can be even further diversified through location and property type. A multi-family home in a high-rent area or a vacation rental in a desirable location are both examples of using location to increase your portfolio’s diversity!

The question now is whether you are missing an opportunity to diversify your own portfolio. If so, I invite you to contact me so we can discuss the best strategy to maximize your portfolio or start building it in the first place.

Work With Denise

My purpose has always been to help others, from being a tennis pro to teaching at Texas A&M to helping people invest in real estate. I have spent 30+ years helping people navigate the world of real estate. My goal is to both help you put together a real estate investment game plan and implement it.

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