Diversifying Your Real Estate Portfolio

As San Mateo property managers, we’re always encouraging our investors to diversify their real estate portfolios. Diversifying an investment portfolio reduces your risk and provides some growth potential you might not otherwise have.

If you’re not sure how to diversify your portfolio of investment property, we have some ideas for you. It might require re-visiting your investment goals and thinking more creatively, but you’ll find that you can often build your long-term ROI and increase your short-term cash flow when you’re willing to try something different.

Residential Investing with Single-Family and Multi-Family Homes

Single-family homes are always likely to make great investments, especially in the San Mateo rental market. Well-maintained homes in good neighborhoods are in high demand with tenants. Owners know that they can charge more rent when they’re offering more space, the privacy of a detached home, and extras like a garage or a large yard. Single-family homes are also going to appreciate quickly and increase in value, allowing you to build more equity with each passing year that you hold the asset.

Consider multi-family properties as well. There are many ways that this can help you earn more with your rental investments. Multi-family investments will provide more income for you and less vacancy risk. Instead of collecting one rental payment every month, you’ll collect two or three or even 10, if you invest in a small apartment building. If you lose one tenant or have to turnover two units, you’re still going to have rent coming in.

Consider a Portfolio with Commercial Properties

If you’ve built your whole real estate portfolio on residential properties, you’re probably doing very well. However, if you want to add some diversity to what you own, there are always commercial properties to consider. This might not have been a part of your initial investment strategy, but there are benefits to commercial spaces.

Commercial real estate generally brings lease terms that are longer in length and more favorable to owners. With a good commercial property, you’ll have lower vacancy rates, higher rents, and less maintenance than with residential units. Commercial properties can be anything from retail space to office buildings to industrial or warehouse spaces. There are different rules and best practices, but a team of qualified and experienced property managers can help you navigate those changes.

Explore Different Real Estate Markets

You can also think outside of the region you’re currently investing in. San Mateo offers some great opportunities, for example, especially if you’ve been investing in Los Angeles or San Diego or even out of state in some east coast cities.

When you’re exploring new markets, look for strong economies and a reliable tenant pool. You’ll need to know your acquisition costs and how much rent you can expect to earn.

Diversify Your Financing

There’s more than one way to finance your investment property purchases.

Many investors insist on paying in cash and others are more likely to take a traditional mortgage. You might be able to get a better deal if you try owner financing. You usually won’t need a large down payment, and if you structure the deal so that you’re primarily or completely paying the principal, you’ll find your cash flow and your ROI can improve quickly.

Other ways to diversify your real estate investment portfolio include platforms like a 1031 Exchange. You can shuffle around the properties you’re currently holding and trade them in for new investments when you want to buy something else and let go of an asset you’re holding.

We love to help our clients invest in new ways. If you’d like to talk about your specific portfolio, please contact us at Bayside Management.

Founded in 1982 in Marin County, Bayside Management has expanded to offer full-service San Mateo property management to the entire San Francisco Peninsula. We manage single-family properties, multi-unit complexes, commercial properties, and homeowner associations.