The best ways to diversify your real estate portfolio

In every investment portfolio, there should always be an objective of minimizing the portfolio’s risk exposure to balance possible underperforming investment vehicles with those that perform better. This principle can be applied to real estate portfolios so that the investor can find the best position to mitigate risks. 

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Diversification is one of the solutions many investors use to abate risks and maximize potential returns or profits. Below are some ways how to diversify a real estate portfolio: 


  • Invest in multifamily properties: Multifamily properties are defined as residential housing that is comprised of more than one unit. Currently, it is the least common type of residential properties, but they present a good balance of risk and reward as vacancy becomes less likely, there are multiples streams of revenue, and they allow investors to scale faster than other residential types. 


  •  Invest in commercial properties: Including commercial properties in a real estate portfolio is typically one of the ultimate goals of investors; it does require hard work and increased efforts, though. The benefits commercial properties bring to a real estate portfolio are steady cash flow, decreased vacancy risks, better leasing contracts, and higher income potential. 


  • Invest in REIT: REIT, or real estate investment trust, is akin to investing in stocks by buying publicly available common shares. Instead of stocks in companies, however, REIT lets investors acquire shares in properties, mortgages, and other real estate-related investment vehicles. It is a great tool for diversification as it offers regular incomes streams and long-term capital appreciation. 
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