Balancing Your Passive Real Estate Investment Portfolio

balancing your passive real estate investment portfolio

Everyone who has been doing effective passive real estate investing will tell you that maintaining a balanced portfolio is the secret to success. It is wise to diversify your real estate portfolio among several different sectors in order to mitigate risk and increase your passive income.

Most investing experts recommend engaging in both commercial and residential properties as an investment strategy.

In addition to building a passive portfolio that generates passive income, it is also important to even out the risks associated with them. Developing a balanced real estate portfolio can be made easier by utilizing the following tips.

Investing in Passive Real Estate: Why it’s Important to Have a Balanced Portfolio?

It is likely that you have heard advisors encourage real estate investors to balance their portfolios. An individual investor might think that they should invest in various properties—a mix of apartments, commercial storefronts, and single-family homes. In a sense, that is good, but you also want to balance your risks.

There will be an investment return for all types of properties. There is, however, no guarantee that the investment will yield a profit because a certain amount of risk is involved.

What if your rental income falls? What if the tenant damages the rental property? What if your mortgage interest rates increase? All of these factors contribute to the investor’s risk—the higher the risk, the higher the investor’s expected return should be.

While investors want to maximize their rate of return, investing only in high-risk properties can be risky. To offset the high-rate risks posed by their lucrative investments, property owners must ensure that their portfolios contain a sufficient number of stable income-producing investments.

How to Maintain Balance in Passive Real Estate Investments

A real estate portfolio that grows over time can provide enough income to fund a comfortable retirement.

If you own a diversified portfolio of residential and commercial properties that generates positive cash flow, you won’t need to worry about many of the economic factors that threaten investors in individual stocks and mutual funds.

Understand Your Market Area

A thorough market research in passive real estate investing is crucial. Even if you already have a specific neighborhood or area in mind, you should broaden your research to provide you with the information you need to compare properties.

Look for properties that are selling well within your price range. Check the courthouse for areas where cash-only homes are being sold. Because investors are the normal cash buyers, you’ll know what areas other investors, who may have a lot of experience, are investing in.

Learn How to Value Properties

Find out how real estate agents conduct a comparative market analysis (CMA). A successful investor will tell you to buy below market value as soon as possible.

In this way, you are guaranteed a profit at closing. In addition, lower mortgage payments make it easier to generate a profitable cash flow.

Assess Rent Prices and Competition

Search the print and online media for ads in the local area where rentals are advertised. Whenever you research a neighborhood, find out what the average rental amounts are for the type of properties you are considering.

Approximately how many are available? Is there any incentive offered by owners, such as a free month? You should know what to expect in terms of rent.

Keep Expenses Under Control

The expenses you have are those you would expect, such as real estate taxes, insurance, and budgeted repairs. All properties in a neighborhood will be subject to these types of expenses. Some of these expenses might be deductible, but it’s better to reduce them altogether.

If you estimate expenses incorrectly, you may end up locking in a below-market rental for a year. This will cause you to lose money. Considering properties in their current condition is one thing, but you should also set aside a budget for any obvious repairs you will need.

Invest in Real Estate Investment Trusts

A major advantage of owning REITs is their liquidity, mainly because they are publicly traded. These investments typically have higher dividend yields than money market rates and can be held for short or long periods of time.

When you sell shares, you can immediately use the proceeds for a house purchase, college tuition, or other planned purposes, including future capital requirements for private equity investments.

In addition, public REITs can be used to optimize the real estate asset allocation in a portfolio by incorporating different sectors into it. A private real estate fund investor who is overexposed to multifamily may wish to consider REITs that own other types of assets.

In order to get a certain level of risk tolerance, it may be necessary to combine REITs.

Keep Adding Properties to Your Portfolio

Adding to your rental portfolio is as easy as doing the same thing over and over again once you find your niche and hone your skills. You may want to leverage with equity as you pay down your mortgage, but be careful and do not overextend.

Alternatively, you can sell profitable properties to grow your portfolio by investing in larger or more properties through 1031 tax-deferred exchanges.

Let Saint Investment Group Help You with Risk Management

Diversifying your real estate holdings is crucial to building a balanced portfolio. Real estate investing truly pays off when you don’t put all your eggs in one basket. To continuously profit in real estate, you need to invest in a wide variety of properties and develop a clear strategy.

The importance of setting proper goals and objectives cannot be overstated when it comes to real estate investing. This, however, is only a temporary fix. It takes more than setting your goals to achieve them—you must also make a plan and allocate enough resources.

In our role as a real estate investing company, we are there to guide you through every step of the process, from identifying profitable properties to hiring the right team for property management.We can help you start your market research in passive real estate investing. Reach out to us by emailing us at or calling us at 949-881-7128 at Saint Investment Group today!