Posted about 4 years ago

Don't put all eggs in one basket

During the days when I invested only in the stock market, I always remembered one golden rule; "Diversify". So, I did. I invested in stocks, bonds, and mutual funds. And then within each class of stock market investments I diversified even further. For example, when it came to investing in stocks, I made sure to select stocks from different industries such as pharmaceuticals, food, oil & gas, and entertainment.

The same principal applies when passively investing via syndications; you should diversify by investing in various geographical locations, and/or various asset classes.

Most people feel comfortable investing close to home. But what if close to home is way too expensive?! Select another market; it could be a vacation home or a place that you visit often because you have family or friends there. Another way to select a market is to get advise from an experienced syndicator that has been operating in a particular market for some time, and already has a team established in the area. Keep in mind that if you're selecting a location based on the syndicator's investment focus, make sure to learn about that area yourself as well. Also, try not to limit yourself to a only a single location even if your favorite syndicator invests in one geographical location. That area could be risky as a single investment. For example, what if it's a small town that has a military base as a major employer. What if this employer decides to relocate to a completely different area? Then all your investments will be impacted. Do you know the cliché that every mom used to say to her little kid, "Don't put all of your eggs in a single basket"? Well, clichés are clichés only because they are so true.

Diversification is equally applicable when it comes to various asset classes. While we all lived in an apartment building at some point of our lives and hence feel pretty comfortable with multifamily investing, it doesn't take much to research other asset classes, such as for example, storage or mobile home parks. So do your research to help you decide what other asset classes you would like to invest in and take action.

In summary, I want to emphasize the importance of diversifying your real estate portfolio. Are you ready to diversify your portfolio? If so, continue reading here.