What Is a Real Estate Portfolio? (And How to Start One)


Real estate investors bought $64 billion worth of investments in just the third quarter of 2021. This amounted to 90,000 homes in just three months. 

If you’re looking at your options to invest in real estate, you’re going to have plenty of questions. You’ll want to know how to get started. You might ask, “What is a real estate portfolio?”

Well, it’s definitely not something that you carry around that contains your latest art projects. A real estate portfolio is a key part of real estate investing.

Are you ready to learn about real estate portfolios and how to build one?

Let’s get started!

What Is a Real Estate Portfolio?

Simply put, a real estate portfolio is your collection of real estate investments.

Your portfolio can be comprised of a single rental property or several rental properties. You can have a portfolio made up of different types of real estate investments, such as residential and commercial properties.

Building a real estate portfolio of multiple properties helps you make more money. You’ll have more equity across properties and you can earn more passive income.

The real estate portfolio also gives you more leverage. You’ll be able to borrow more from banks to finance other properties.

Diversify Your Portfolio

One phrase you’ll hear often in real estate investing is that you have to diversify your portfolio. This is essential to understand.

Diversification protects all of your investments.

Let’s compare your real estate investments with a dozen eggs. If you put all of your eggs in one basket, you can lose all of them if that basket breaks.

Diversify your eggs instead. Put your eggs in several baskets. You might have 3 eggs in four different baskets. Should one of those baskets break, you won’t lose all of your eggs. You’ll only lose a few of them.

That’s why people tell you not to put all of your eggs in one basket.

You shouldn’t do that with real estate investments. The rental market could burst, causing you to lose money on your rental units.

How can you diversify your real estate portfolio? Start by learning about the different types of real estate investments.

Different Types of Real Estate Investments

You’re likely to be familiar with rental property investments. That’s how most investors get started.

Real estate investment trusts are corporations that get traded on stock exchanges. These companies purchase and maintain commercial properties such as malls and office buildings.  

A rehab investment lets you buy a run-down residential property below market value. You then renovate the property and resell it at or above market value.

Your profits come from the sale of the home, but you need to sell the property for more than the purchase and rehab costs.

Real estate crowdfunding is an inexpensive way to diversify your investment portfolio. These are websites that offer investment opportunities to hundreds of other real estate investors.

These opportunities are usually in commercial investments that you wouldn’t be able to invest in on your own. You get to pool your resources with other investors to fund different projects.

Some crowdfunding sites have net worth and income requirements, while others let anyone invest with a $500 minimum investment.

You could purchase raw land and lease it to farmers. Depending on the location, you could purchase land and develop residential properties on it.

This is a long-term investment that comes with a lot of risks. For instance, you might not get zoning approvals after you buy the land.

How to Build a Real Estate Portfolio

There’s no singular way to build a real estate portfolio. How you build your portfolio depends on a few things.

The first thing to know is your investment goals. Some investors just want to have a single rental property. Others want to replace their income with passive income from investments.

The second thing to know is your level of risk. This will help you decide how important diversification is and when to start diversifying your assets.

Choose Your Real Estate Investment Type

What type of real estate investment will get you to your goals? Most people decide that it’s residential real estate.

Remember that you don’t need to have a lot of money to get started in real estate investing. You can borrow funds from a bank for your first real estate investment.

Investors that want to purchase a real estate investment can go to a bank or credit union. They may be able to qualify for a government-backed loan.

This could lower the down payment amount, making real estate investing more accessible.

Choose Your Real Estate Location

The location of your real estate investment matters. The real estate market varies widely between cities and even zip codes.

Real estate investing doesn’t mean that you’re limited to your city. There are plenty of growing markets all over the country.

Austin, Texas is one of the hottest real estate markets because of the high quality of life. Every sector of the real estate market has seen double-digit increases there.

This article on ballardbuilt.com explains why.

There are other cities like Charlotte, North Carolina, and Boise, Idaho that are experiencing growth right now. You need to research the local market and decide where you want to invest.

Calculate Profitability

You need to run numbers before you buy an investment property. You need to know what your costs are to own and maintain the property.

That includes insurance, taxes, mortgage, and maintenance payments. You’ll then have to learn what the rental market can bear in the area.

Build a Profitable Real Estate Portfolio

What is a real estate portfolio? It’s the total of your real estate investments. There are many ways to invest in real estate. Spread your investments across them, and you’ll protect yourself in turbulent times.

If you enjoyed learning about real estate investing, you’ll enjoy the other articles on the blog. Check them out today.

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