A growing real estate investment portfolio is a profitable collection of assets that allows you to build wealth over the long term. While renting out one property is a great way to earn short-term rental income, consistently adding to your portfolio will do even more for your financial success. By managing multiple properties, you’ll earn more income and spread some of the risk around, especially when you have the good sense to diversify your investments.

Are you worried about straying too far from what you know?

That’s understandable. But, we feel it’s important that you understand how diversifying your real estate investments can only create a stronger portfolio for you.

A good property management partner will help you leverage the investments you currently own, and show you how to make more money with them and grow your portfolio. The money you can earn from your properties goes well beyond the rent you collect every month. Understanding where to find the best opportunities will help you make more money, too.

Here’s how to do it, and what we can do to help you.

Investing in Different Types of Property

Are you particularly fond of buying single-family homes? Or, do you prefer multi-family units?

If you’re solely focused on one type of property, then there’s good news: diversifying your portfolio will actually be easy. There’s a lot of opportunity waiting for you.

Consider investing in a rich smorgasbord of investments:

Single-family residential properties. These often lead to better tenant retention and higher rental values. Your property value will appreciate faster, too.
Multi-family residential units. These rent quickly. There’s often fewer expenses and less maintenance.
Apartment buildings. Even if you’re renting out a small building with six units, you’re avoiding vacancy risk and leveraging unit economics when it comes to maintenance, landscaping, pest control, etc.
Commercial property. It doesn’t have to be all residential. Plenty of Florida communities are in development that combine residential and commercial space. Think about storefronts and restaurant space.

There’s also the ongoing debate over vacation homes versus long-term leases.

Instead of deciding which type of property to rent out, why not do both?

By managing multiple properties that are all different from one another, you can reduce the risk that’s inherent with real estate. You can also make more money and enjoy a broader portfolio of different property types.

Keeping all of your real estate investments in one particular asset class is not going to protect you from potential pitfalls. In fact, it’s likely to make your portfolio more risky. Be willing to buy different types of properties, and if you’re feeling like you’re outside of your own area of expertise, don’t be afraid to reach out to someone who has a lot of experience with different types of properties. Professional property managers are a great resource.

Diversify What You Own with a 1031 Exchange

Perhaps you like the idea of diversifying the types of properties you own, but you’re not sure how to get started? One of the best ways to diversify what you currently own is with a 1031 exchange. If you have not leveraged this program before, look into what it might mean for you and your investment portfolio.

With a 1031 exchange, you’ll sell an investment property you have and instead of taking those proceeds, you’ll re-invest the earnings into another investment property. This is a fantastic way to upgrade the assets in your current portfolio and look for something different. There are a number of strict timelines and rules associated with this transaction, however, so make sure you’re getting professional advice before you sell an existing property and buy a new one.

Diversifying Your Real Estate Financing

There’s more than one way to finance your investment property purchases. And, you can diversify your portfolio by borrowing money in different ways.

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. There are also hard money loans and private lenders willing to help you finance an investment.

It doesn’t always have to be a traditional mortgage. Work with a broker when you’re looking at different lending products, and be willing to hear advice from other investors.

Diverse Asset Classes When Investing in Property

We talked about single-family versus multifamily and vacation versus long-term lease.

Here’s what different risk measurements look like when you’re trying to do something different within an established real estate portfolio and manage more properties:

Core assets. These are the stable properties that every investment portfolio needs. You plan to hold these rental homes for the long term. They are easy, and the rental income is reliable. You can count on good tenants to pay market rents. These properties have less risk, and they are likely going to see lower returns than other risk profiles.
Value-add properties. Introducing some rental properties that require updates and upgrades before they can really earn you any money might be a new way to approach investing. You’ll pay a lower acquisition price than you would in the first category, and you’ll likely have to spend some time and money reaching the returns you expect. However, once those properties have been made competitive, you’ll see much stronger returns.
Distressed homes. These are homes in danger of foreclosure or already bank-owned. It’s an extremely risky way to invest and we only recommend it if your portfolio can support that risk.

If you typically stick to one risk class, consider buying a property that fits a different profile. Challenge yourself, get some expert advice, and see what it does for your portfolio.

Exploring New Locations

Florida is a fantastic rental market. If you’re an investor living elsewhere and you have considered buying property here, do it now.

Our market is pretty hot. It’s competitive and the prices have risen considerably. But, many cities and communities in southwest Florida can offer a lot of value for investors, and an impressive potential for ROI.

We are a growing and popular rental market. And while you might be worried about venturing outside of whatever market you’re currently investing in, keeping all of your real estate investments in one market is not as safe as it may feel. In fact, this puts you in a lot of risk if the economics turn in that particular market. If a major employer in your city leaves the region or the population starts to move out or the local economy shifts, you might be left with assets that are no longer worth what they once earned. These are factors you cannot control.

When you’re thinking about how to diversify, think about new markets and different locations. Think about Florida. With our growing population and our high demand for housing, you’ll find there’s a lot of opportunity to diversify and strengthen your portfolio.

Diversify with the Help of Property Management

If you’re worried about these changes or how to manage multiple properties, lean on your professional partners. Investing in a market that you don’t know very well will require some research and education. Choosing to buy an apartment building can be overwhelming if you’ve only invested in condos until now.

Manage the learning curve by working with an outstanding local property management company. A good relationship with the right property managers will immediately connect you with a network of vendors, brokers, mortgage professionals, and other experts. You can use those tools and resources to have a more successful and comfortable investment experience, even while you’re diversifying.

We are always encouraging our investors to diversify. It breathes new life into your portfolio, it increases your chances of profit and success, and it reduces your risk.

Establish a relationship with property managers before you buy. This will allow you some insight into the market and how it will match your investment goals. You’ll know how much rent you can expect to earn on a specific property, especially if it’s a property type you’ve never purchased before. Your property management partner will also help you estimate potential expenses. This is invaluable when you’re branching out into new territories. Get a good property management partner.

Let’s take a look at your current investment portfolio and your existing investment goals. This will give us a great starting point as we think about how to diversify what you own and increase the potential of your investments. A growing portfolio is a fantastic way to earn real money on real estate.

We can also take a look at the properties you own and make some suggestions on how to leverage them to acquire new assets or increase what they’re worth on their own. Some improvements and updates might mean higher rental values and better tenants.

Diversifying Your Real Estate Investments: Managing Multiple Properties