Percentage of Net Worth to Invest in One Property

3 Replies

Hey all, I was wondering if anyone had any thoughts one what the maximum percent is that is good practice to invest into one single investment. For instance, if one’s net worth is $500K, and most of its tied up in real estate, would it be a good idea to keep the next investment at $100K or less (20% of total net worth) from a diversification standpoint to prevent from devastating loss in the event something majorly goes wrong with the property? I’ve got 10 single family properties in my portfolio, and I’m dabbling with the idea of a small apartment, but if I pursue that, it would be a significant portion of my net worth that could potentially go south, and I don’t want most of my eggs in one basket. Does anyone have any guidance on threshold standards? 25? 20? 15? 10?

Hey @Sarah Gregory , you'd still be diversifying your portfolio within real estate. During the last crash, the niche that came out the best, was multifamily. I think that if your 10 property portfolio is stable, pursuing a small apartment isn't as risky as you think. Just make sure you do a proper and thorough due diligence, and don't become emotionally attached to any potential property.

You have a good size portfolio. So I say you shouldn't put any of your money into it. 

You could create an investment opportunity for someone else and grow your net worth without deploying your own funds.

Just a thought...

I am a strong believer in diversification. I try to keep any single investment to less than 10% of investment net worth but sometimes appreciation (like in the Bay Area) pushes it up above that. Still from the basis of cash I put in , it would be less than the 10%.

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