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The Importance Of Diversifying Your Real Estate Portfolio

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The Importance Of Diversifying Your Real Estate Portfolio

We continually hear investors talk about the importance of diversifying our investment portfolios. The diversification of assets allows us to have more security in our income stream in the unfortunate case that one of these assets goes south.

This same concept of diversification can also be applied to real estate. Diversifying your real estate portfolio, similar to diversifying your investment portfolio, helps to create security and decrease volatility. 

Why Diversify?

One of the pros of diversifying your real estate portfolio is getting to expand your property search. Instead of just looking at the area where you live, you are able to expand your search to up and coming areas where the properties are expected to have significant appreciation rates.

And in addition to location, you can also diversify your portfolio by property type. CEO of real estate investment firm Stablegold Hospitality, Ali Jamal, said he follows a 60/20/20 allocation approach. This rule includes 60% in multifamily residential properties, 20% in vacation rentals from single-family properties, and 20% in private equity real estate funds. 

His allocation approach is one of many based on personal preference and a proven track record of success. In terms of how to diversify your portfolio, consider what properties you would like to manage or ones you believe will result in the greatest returns over time. 

Diversifying your portfolio is also advantageous as it will allow you to benefit from the higher appreciation of single-family homes while also benefiting from the higher monthly income stream of multifamily properties. 

To make the diversification process easier, try using online real estate marketplaces such as Roofstock.

Roofstock lists carefully vetted, single-family rental properties in multiple states across the U.S. Roofstock also works to mitigate risk by offering a rental income guarantee. Roofstock will pay 75% of the market rate rent if no tenant has moved in within 45 days. Their properties also come with a 30-day money-back guarantee if you decide you no longer want your recent purchase.

Roofstock can even get you in touch with someone to help manage the property if you aren’t able to do so personally.

It may take some time to find the right properties for your portfolio, but taking that time to research the right investments for you could result in massive gains in the long run.

Browse Roofstock’s active listings here.

Read more about Roofstock:
Roofstock Review

Photo by Piotr Chrobot on Unsplash

 

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Posted-In: RoofstockNews REIT Real Estate

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