Strategies for Managing a Diverse Real Estate Portfolio

Updated: Oct 27

Most people build a real estate portfolio to make money for themselves and their heirs. However, without proper management, that investment can fail to meet such high expectations.

You may be an expert at managing a real estate portfolio consisting of your primary residence and a vacation home. But what happens when you’ve gathered up 10, 15, or even 100+ properties? The strategies are very different, as is the complexity of the task.

Here’s what you need to know about managing a large real estate portfolio.

What Is a Real Estate Portfolio?

A real estate portfolio is made up of several properties that collectively make the owner money. Your property portfolio could be made up of similar types of buildings, such as apartment complexes and multi-family homes. Or you could include properties of several different types, such as commercial and residential options, all mixed together.

Who Invests in a Real Estate Portfolio?

Researchers with the Harvard Division of Continuing Education say that real estate investments are valued at more than $230 trillion, and they make up the world’s largest asset class. These numbers suggest that many people participate in building a real estate portfolio.

In a 2023 Gallup poll, 34% of participants chose real estate as the best investment option. That’s down sharply from the 45% recorded in 2022. Numbers like this suggest that now might be a good time to build a real estate portfolio if you haven’t done so already. Fewer people can mean less competition for the properties you want.

7 Strategies to Help You Manage Your Real Estate Portfolio

Once you’ve built a healthy portfolio, you must do your best to keep it that way. These techniques could be helpful.

1. Watch the Market

Some moments are ideal for buying, while others are best for selling. For example, experts say mortgage rates are largely the same now as they were in 1971. However, minor fluctuations from year to year often appear. If you’re watching the numbers closely, you can understand the exact moment to leap.

2. Keep Tabs on Your Books

While the markets can tell you a lot about what other people are doing, it’s critical to pay attention to your own financial data. How much do you have in income? How much do you owe? What other issues might be on the horizon? What improvements are required on the properties already in your real estate portfolio?

With so many factors to consider, you may need outside help to make sense of it all. However, just hiring an accountant or financial advisor isn’t enough. You must also review the reports regularly and make decisions accordingly.

3. Seek New Horizons

If all of your properties are in the same geographic region, you could be missing some exceptional opportunities. For example, researchers say that California median listing prices rose 50% between January 2020 and January 2021. Those same gains weren’t present in the Midwest.

Stats like this prove that investing in a different geographic region could be a smart strategy to diversify your real estate portfolio. You could purchase a property at a lower cost, or you could tap into a market that’s exploding.

4. Try New Investment Types

Experts say commercial properties offer more financial rewards than residential properties. However, they can also involve more risks.

Diversifying your portfolio can mean adding some apartment buildings to your commercial properties, or the reverse might be true. Dipping your toe into another type of investment could help spread out the risk and potentially deliver bigger benefits. Consider new types of investments to ensure you are appropriately taking advantage of all opportunities.

5. Build the Right Team

To manage a very large real estate portfolio, you’ll need plenty of expert help. The larger your portfolio, the more people you might need to assist.

A typical real estate investment team consists of the following key players:

Realtors: You’ll need an expert who can help you find the right properties and shepherd them through the sales process.
Lenders: To complete your purchase, you’ll likely need to borrow money. A lender can make this possible.
Attorneys: Some transactions are so complicated and come with so many risks that you need legal help to protect yourself. This investment can be well worth it if it keeps you out of legal problems.
Title companies: As part of the transaction, you must complete formal paperwork with a trusted title company.
Contractors: If your properties need work before or after the sale, you need a trusted partner to handle these projects.
Managers: If you have tenants, you’ll need someone to manage your properties and handle any requests that might come up.

6. Connect With Peers

You may know quite a bit about your community, investments, and banking environment. However, some opportunities could pass you by because you’re unaware of them. Finding other investors could be a smart strategy.

Your local chamber of commerce may be a good place to start, or you could look for Facebook or MeetUp communities made for investors. Your goal isn’t to share your secrets but to learn from peers and mentors and find what’s working for them.

7. Try Other Opportunities

So far, we’ve talked about real estate portfolios made up of buildings and land you identify and buy. These aren’t your only options for your portfolio. You could consider other opportunities that allow you to share the purchase (and the risk) with other people.

For example, you could participate in a real estate investment trust (REIT), which owns several types of real estate assets. These products were created in the 1960s as a way to allow for real estate investments. Profits are typically distributed to investors as dividends.

Crowdfunding sites are another option. Sites like Fundrise, EquityMultiple, and Crowdstreet bring together multiple investors who buy parts of properties collectively. Rather than finding and purchasing one property with your team, you can find a site you like and invest by simply placing money on an opportunity you like. This is a great way to spread your risk and share it with others.

Explore 1031 Exchange Opportunities

Many of the options we’ve discussed involve selling one property and purchasing another. Often, these transactions come with tax penalties. Investigating a 1031 exchange could help.

A 1031 exchange involves selling one property, buying another, and transferring the potential tax to the new property. The tax bill doesn’t go away, but it’s blended with the new property and may not come due until that new property is sold.

At 1031 Pros, we specialize in helping people just like you move through complex 1031 exchange purchases. It’s our sole business focus. If you’re interested in learning more and finding out if this opportunity is right for you, contact us. We’re eager to help.