When does diversifying become considered as spread too thin?

Question

I am continually developing my business plan and roadmap to set targets for myself. So far I have a portfolio for sfh/small mfh along with a portfolio for student/campus housing. However, I also have commercial real estate, larger apartments, and even short term/vacation rentals on my radar for the future.

How diverse are your real estate investments? How do you reign in your thoughts/wants? Do you try to cast a wide net, then evaluate which is most profitable/logical for yourself and then dive more into that? At what point is a portfolio considered too diverse and what are the risks?

Phong Bui · Answer

I can understand this from a volume perspective, but even if I have the systems and persons in place to streamline my current operations, what reasons would there be to not diversify to the extent I listed? In the back of my mind, I feel like I'm missing something and it would be too much. It just doesn't seem common.

Eliott Elias · Answer

You're spreading yourself too thin when you grow too quickly without the right systems and people in place. If every single property you buy requires your attention then I wouldn't diversify just yet. Look at a chart of your business and your name should only be in one place

Henry Clark · Answer

I would break down investing into components to answer your question:

Financing

Buying

Operating

Maintenance

Building

Geographical

Insurance

Personal day job or lifestyle

Etc

Now map your your investments in growth levels.   When do you gain or lose synergy?   When do you hit a tipping point and become a personnel manager versus an REI person.   When do you get to the point where you start to prune your investments to make your business model more efficient.

Some people are just hyper and will like having variety or chaos.

You might decide to be a developer.   And take on good deals.   Clean them up and sell them.

Look at your day job and personal life to offset these decisions against