Diversifying your Real Estate Portfolio with the different Real Estate Asset classes

"Diversification is a protection against ignorance.”

– Warren Buffet

Are you the type who'd put all eggs in one basket? Or would you consider 'diversifying'? We will not talk about eggs here but let’s discuss your Real Estate Portfolio.

Excellent management leads to a successful Real Estate investing venture. But it needs time, social skills, organization, and paying attention to every detail.

If you own multiple Real Estate Investments across various asset classes, here's how you can effectively manage your portfolio.

Why is Management an Important Component Here?

Property Portfolio management vets the associated risk of Investing in Properties. It also tells you about your future income stints.

So, the reasons why you want effective Portfolio management are for:
 a)    Streamlining operational costs to avoid bleeding resources.
b)    Planning to help nurture a successful and profitable ecosystem.
c)     Knowing the right time to Invest and the best Property to Invest in.

In short, it will help you create a sustainable and profitable ecosystem for your Portfolio.

Don't Put All Eggs in One Basket - Diversify

Diversification is an Investment strategy that is a mixed bag of Investments. Diversification helps spread your Investments across Asset classes, strategies, and sectors. In case there is an economic decline in one area, your Portfolio as a whole will not be direly affected.

So, diversification yields higher risk-adjusted returns, and in minimizing risks, you get to reach your financial goals without any hiccups.

Some Pointers to Diversify Your Real Estate Portfolio

By Sectors

• Residential: They can range anywhere from single-family units to multi-family residential units. This Investment type translates to renting out the Property to acquire rental income from your tenants.

  • Pros:

    • Residential Real Estate behaves consistently due to steady demand for housing which translates to a regular income flow. 

  • Cons:

    • Shorter lease length than commercial Properties, which sever income flow after the lease period is over.

• Industrial: Industrial Real Estate involves units used for industrial purposes like manufacturing, storage, and production. Unlike Residential rental income, this one has a higher yield.

  • Pros:

    • An extended lease agreement ensures security, and tenants also cover some property expenses.

    • Higher rental rates of this kind of Property also mean higher yields.

  • Cons:

    • A higher upfront investment for the investor

By Strategy

• Flipping underperforming Properties: This involves Investing in distressed or underdeveloped Assets and redeveloping them to maximize your returns. It also entails Investing in an empty plot of land and developing a building based on demand in the market.

  • Pros:

    • The internal rate of return can range up to 15%

  • Cons:

    • There is a high risk of investment

• Old School Core Investment: In this strategy, you can Invest in Properties in good condition with low vacancy rates. Typically, this is called a buy-hold model where it generates steady returns via rental incomes.

  • Pros

    • Low risk and steady income assured

  • Cons

    • Higher yields in terms of return are unlikely

So, while diversifying, work on the best Asset allocation strategy. It will help you reach your business goals and streamline income inconsistencies risks.

• Tactical Asset Allocation: This strategy addresses challenges associated with long-term Investments. Here, the aim is to maximize short-term Investment strategies to help you cope with any dynamic market behavior.

• Dynamic Asset Allocation: One of the most popular investment strategies. This strategy enables Investors like you to adjust to Investment proportion based on the undulations of the market, highs & lows, i.e., gains and losses.

• Constant-Weight Asset Allocation: This is a buy-and-hold strategy where you buy something that loses value in the market, hold on to it till the price increases, and then sell a significant proportion of it.

Some pointers to help you save time while managing your Assets.

• Consider an active Assets Management Software because a one-stop digital solution can make management effortless.

• Be it a concentrated local Portfolio or a geographically distributed one, a Portfolio management system can holistically enable the smooth functioning of management.

• Document every step to stay on track.

The bottom line is that technology is your biggest ally. 

This Is How We Can Help! 

Real Estate Investments have several associated risks: legal, operational, tenant default, refinancing, health, and more. To be able to comprehend these risks fully and analyze them would need a thorough assessment that can help you find

• cost-efficient alternative options.

• ways to add value to your portfolio

• the route to maximum income 

Indiassetz has some answers to help you mitigate any hurdles associated with Real Estate Portfolio management. Our cohort of advisory, in-house experts, and native technology have made Indiassetz a one-stop digital solution to managing Real Estate Portfolios.

With our Portfolio Advisory Product, you can also remotely monitor your Portfolio and maximize your Real Estate Wealth. Here's an overview of how you use this product to get the best result while managing your Portfolio.

• In-depth market research

• Holistic market survey

• Micro-market analysis

• Engaging in grass-root level conversation

Does this interest you? Find out more about India's first one-stop Real Estate Banking Platform that is research-driven and provides evidence-based solutions.

---

We manage your Real Estate,

Totally and Completely