The Top Real Estate Assets to Diversify Your Portfolio

by | May 23, 2023 | Investing Process, Passive Investing, Real Estate Investing 101 | 0 comments

As a real estate investor, it’s vital to diversify your portfolio. You don’t want to put all your eggs in one basket because if that basket cracks, you could lose everything. Instead, spread your capital around and invest in different types of assets. So, how do you keep your real estate portfolio diverse?

In this blog, we’ll explore some real estate assets you can use to diversify your portfolio. Keep reading to learn what they are.

Storage

Storage properties are a great addition to any real estate portfolio. By owning a storage property, you can offer clients a needed service and diversify your income stream.

Choosing a Storage Property

Storage properties are perfect for many different purposes, from personal storage (i.e., self-storage) to business storage. This versatility makes them a unique investment that can appeal to a wide range of clients.

There are a few things to keep in mind when looking at storage properties:

  • First, the sponsors should make sure the property is in a good location. It should be easily accessible for clients and have a good amount of traffic.
  • Second, the sponsors must research the competition. There may be other storage properties in the area, so it’s essential to make sure the property can stand out and is competitive.
  • Finally, the sponsors should ensure there is a good marketing strategy in place that promotes the property to local businesses and individuals who may need additional storage space.

Self-storage properties can be a great investment because it’s a necessity for many people and businesses. Storage units are generally set up on auto-pay to create a stable rent collection, and when units go into default, they can easily be auctioned off and quickly turned over – a storage unit isn’t a home the way an apartment is, so the emotion is removed and taking over non-paying units is simple. Storage property is also a relatively low-risk investment, as it’s not as vulnerable to economic downturns as other real estate investments.

Hotels

When most people think of real estate, they think of apartments and houses. But there’s another type of residential eal estate you can use to diversify your portfolio, and it’s hotels.

Like other types of real estate, hotels are a physical asset that you can own and use to generate income. And like other types of real estate, the value of hotels can go up and down depending on the economy and the market.

But what makes hotels a particularly good investment is the fact that they tend to be somewhat recession-resistant. People will always need a place to stay during travel, even during tough times. Buying a hotel can give you a ready-made business with a customer base and a steady stream of income.

Industrial

Industrial properties are a great way to diversify your real estate portfolio. Industrial properties are used for the manufacturing, assembly, and distribution of goods. They can be used for various business purposes, including warehousing, light manufacturing, and research and development.

Industrial property is a relatively safe investment. It’s less susceptible to market fluctuations than other types of real estate, making it a good choice for investors looking for stability. Tenants of industrial properties also tend to have low turnover because of the heavy investment corporate tenants make to set up their space for their specific business needs. 

It is common for industrial properties to have NNN (triple-net) leases, where utilities and other operating expenses can be passed through to a tenant. For example, a manufacturing plant may use a lot of energy to operate their equipment, and the tenant will be responsible for those expenses, not the landlord. These leases also give landlords (and investors like you) consistent and predictable income from the property.

Industrial properties can be a great investment for your business. They’re stable, safe, and versatile options that can help you grow your business.

Build-To-Rent

With home prices on the rise, the build-to-rent (BTR) sector has been growing in the United States for the last few years. Build-to-rent is a real estate asset you can use to diversify your portfolio and provides a steady, long-term stream of rental income. In a build-to-rent property, the builder constructs a property with the intention to rent it out rather than sell it. These types of investments are held longer than most syndications, generally 7-10+ years.

A BTR investment generally has little to no cash flow while the property is being developed, which can be anywhere from 1-2+ years. Once the majority of the BTR units are leased up and stabilized, you will be able to receive cash flow on a consistent basis.

Once a BTR community is sold, you can expect 

By investing in a build-to-rent property, you can help spread out your risk and minimize your exposure to any one market.

Short-Term Rentals

A short-term rental, also known as a vacation rental, is a property that’s rented out for less than a month. These properties can be a great way to diversify your real estate portfolio and generate additional income.

In a world where people are constantly on the go and able to work remotely, the short-term rental market is booming. People are looking for a place to stay for a night, a week, or a month, and they’re willing to pay a premium for it. This presents a great opportunity for investors who are looking to diversify their portfolio with another real estate asset and ability to achieve high cash flow. However, it has a higher volatility to economic recession than some other types of real estate.

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