How to Create a Diversified Portfolio of Private Real Estate Investments

private real estate investing

A diversified portfolio is a concept you’ve probably heard before, but do you know how it applies to your private real estate investment? Are you aware of how and why, as a real estate investor, you need to diversify?

The key to solid returns comes from diversifying your investment portfolio. Even though there is no guarantee of a positive return in the real estate market, diversifying your portfolio of private real estate investments increases your chances.

What is Diversification?

Spreading the risk throughout your investment portfolio is what is meant by diversification. You invest in assets that can balance the risk of a complete loss in various markets or asset classes. The risk is lower because if one investment does poorly, another one might do well.

Using real estate investment strategies to diversify your portfolio may seem challenging, but there are various investment decisions you can make to achieve them. You might invest in business and residential real estate, for instance.

Also, you can diversify by investing in other geographic markets or by holding both physical real estate and real estate investment trusts.

Why Diversify Your Private Investments?

No matter what you invest in, including real estate, portfolio diversity is crucial. You run the danger of losing everything if everything goes wrong when you put all your eggs in one basket.

By investing in several asset classes, or in the case of private market investments, various property kinds, and locations, you can reduce risk by diversifying.

The 6 Best Tips for Diversifying in Private Real Estate Sectors

Here are six suggestions for building a diversified portfolio in private real estate investment that has the potential to produce earnings and capital growth. In the end, diversity won’t ensure profits or shield you from losses, but it certainly can be helpful in achieving your investment objectives!

1. Invest in a Variety of Types of Properties

Investors should diversify their real estate portfolios by asset type—sometimes referred to as an asset class. This is to reduce the risk of holding too much of a type of asset. This entails making investments in a variety of income-producing properties, including multifamily, industrial, net-leased retail, self-storage, and medical offices.

2. Place Your Investments in a Variety of Locations

To avoid investing too heavily in a specific property market, investors should spread their real estate portfolios across geographies.

To potentially protect yourself from a single geographic event like a hurricane, earthquake, broad rent control measures, or other tenant-friendly laws or regulations that could affect investment performance, make sure your investments are spread across multiple markets, ideally in different regions of the country.

3. Consider Both Passive and Active Investments

It is commonly assumed that real estate investors must only make active investments in real estate, but a good portfolio combines both active and passive investments. In other words, what do active and passive investments mean?

The act of actively investing in private real property involves buying, owning, renting out, and maintaining rental properties. The property belongs to you, and you are responsible for choosing tenants, collecting rent, paying taxes, maintaining it, and eventually selling it. When it comes to this investment, you have to put in a lot of time and effort.

Passive real estate investing looks like buying shares of a real estate investment company that does the ‘active investing’ for you. Real estate investment trusts are one example. You purchase shares of a real estate company that buys commercial properties, rents them out, and manages them. As a shareholder, you earn a portion of the dividends, plus monthly rent and capital appreciation.

A diversified portfolio with active and passive investments gives you the chance to earn from many types of real estate assets, with the potential of each performing differently.

4. Cost of Investment

It is also possible to invest in real estate at various values if you spread your capital across a number of investments.

There is even a possibility that you may not invest in rental properties at all. An example would be to buy an undervalued house that is a steal, fix it up, and resell it. Because of this, you can expect a higher return on your investment with a low investment cost.

Furthermore, you can purchase commercial properties or single-family homes at higher costs and rent them out to generate cash flow. You can diversify your portfolio and earn better returns by investing across a range of costs.

5. Risk

Having a diversified portfolio based on risk is also important. It is extremely essential to recognize that all private investments have some type of risk, but identifying those which have additional risk can help you spread your capital out among several different investments.

6. Invest Through Real Estate Syndication

The best way to gain access to a variety of property types, property classes, and properties across a wide range of locations are through real estate syndication. Aside from its diversification benefits, its investment minimums are lower than other alternative investments.

Prior to this, only accredited and institutional investors were allowed to invest in this way. Nowadays, the industry is now open to non-professional investors as well.

Looking to Diversify Your Private Real Estate Investments?

Don’t just focus on what to purchase when creating a real estate portfolio, instead consider how to create an asset management strategy that balances risk and returns. Even among the same asset class, distinct assets can have various risk and return profiles. Finding a blend that meets your requirements may aid in balancing your portfolio diversification.

A real estate portfolio is just a part of your more extensive investments. Within the larger portfolio, there are stocks, bonds, mutual funds, and other alternative investment vehicles you should keep in mind, too.

Luckily, Saint Investments gives you access to various private real estate assets and other public market investments that are carefully screened and provide high returns toward your goal of diversification.

With our extensive experience in alternative and traditional investments, we at Saint Investment Group eliminate the guesswork in the investment process when it comes to identifying profit-making properties and offers investors a safer investment option. Our company offers security in debt investments within real estate properties, thereby minimizing individual investor risk.To learn more about private real estate investments, email us at or contact us at 949-881-7128 at Saint Investment Group today!