5 Tips to Build a Crisis-Resistant Real Estate Investment Portfolio Knowing which assets are inherently vulnerable to crisis - and how to avoid them - can be valuable information
By Steve Haskell, Vice President of Kay Properties and Investments, LLC
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o, you’ve decided to invest in income-producing real estate as a way to diversify* your investment portfolio so all your assets are not correlated to the stock market’s performance. Now how do you plan a real estate portfolio to build wealth and withstand a crisis? We’ve learned a great deal from analyzing the market through crises including 9/11, 2008-2009, and the COVID-19 pandemic. There are no guarantees and certainly no real estate is immune from a crisis, but these five tips may well enhance the likelihood of having your real estate portfolio hold up even through a severe economic shock like the coronavirus crisis. 74
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Tip #1: Diversify By Asset Type And Geography Diversification is a core tenet of building any investment portfolio. Black swan events do take place and can impact any and all investments, crushing some while lifting others. Diversification does not just apply to stocks and bonds. Investors also should diversify their real estate portfolios by asset type, asset class, and geography. An investor can avoid risk of over-concentration by spreading capital across various asset types such as multifamily, office, medical, self-storage, and others. A challenge for many investors is not having the capital required to purchase various properties all over
the country on their own. Additionally, many investors do not have the time and energy required to oversee a diversified real estate portfolio. This is where Delaware Statutory Trust investments can come into play for anyone looking for greater real estate diversification.
Tip #2: Avoid Asset Types That Are Highly Cyclical, Volatile, And Overexposed To Risk While it is true that any disaster can have a negative impact on any real estate sector, it is also true that some industries are simply vulnerable by nature, and therefore are the first to get decimated during a crisis. For example, hospitality, senior care, and oil and gas are notoriously