How to Balance a Real Estate Portfolio

Every successful real estate investor will tell you that the key to a profitable portfolio is a keeping it balanced. Spreading your real estate holdings among several different sectors mitigates risk and increases your passive income. Many investing experts recommend a strategy that combines a mix of commercial and residential properties. Here are some tips to help you build a balanced real estate portfolio.

Multifamily Properties

This type of residential property has more than one unit under one roof. Also known as multi-dwelling units, a multifamily property offers you an opportunity to generate cash flow from multiple housing units in one building. Single-family residences only give you one cash flow stream from one unit. Multifamily properties also help mitigate risk by offering features in each unit that are similar to single-family properties. This feature opens the door to a larger pool of potential tenants and helps you keep vacancy rates low. We have dozens of these properties listed here.

Commercial Properties

Georgia was not spared from the recession a decade ago, but the business community is doing impressively well, considering. Not only do commercial properties offer an opportunity to generate passive income, but it works as a hedge against inflation. Historically, commercial properties have equaled or exceeded the national average inflation rate each year. Similar to multifamily properties, you can generate several cash flow streams from several units in one building. However, commercial properties are designed to accommodate businesses who also want to generate income. If you are new to real estate investing, experts recommend that you start by investing in residential properties. Investing in commercial properties is a whole different animal requiring a unique set of skills.

Real Estate Investment Trusts (REITs)

REITs are similar to individual stocks in that they offer individual shares to the public for purchase. What is different is REITs are companies or corporations who buy a mix commercial and residential properties for income generating purposes. REITs also finance real estate deals for future income streams. Real estate trusts are a great way to solidify your portfolio by generating long-term yields. Also, when you invest directly into properties, the value of your investment hangs on the state of the current housing market. With REITs, the value is determined by what investors think it is worth on any given day. Building a balanced portfolio requires you to diversify your real estate holdings. The old adage, "do not put all your eggs in one basket" truly applies to real estate investing. You must invest in a broad spectrum of properties and have a clear strategy in place to continuously profit in real estate.

References

http://www.ccim.com/cire-magazine/articles/building-powerful-portfolio/ https://www.fortunebuilders.com/diversify-your-real-estate-investment-portfolio/ http://www.amherstmadisonlegacy.com/