An Ignoble Experiment: Introducing Real Estate Into a Blended Portfolio

Dear Investor,

While shooting for 20% plus annual returns in all our investments may be attractive, spreading risk and minimizing exposure to large market swings is the key to a successful portfolio. Diversification is the process of investing in various types of assets, so a portfolio is not concentrated in a single asset type. Here are some thoughts on introducing real estate into a blended portfolio.

By way of disclosure, we have an advertising relationship with Mortar Group, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.

What are the benefits of real estate portfolio diversification?

The benefits of real estate portfolio diversification are:

Minimize Risk

One of the most notable benefits of real estate diversification is reducing potential risk due to market volatility. In a specialized approach (non-diversified), you run the risk of losing your entire investment amidst undesirable market behavior. Diversification enables you to take precautions so a loss in one area should not lead to major losses overall. A mixture of property types can make it easier to recover from losses in a particular real estate sector.

Combine Levels of Risk

Risk levels are an essential aspect of investment strategy. The amount of risk you accept will depend on your goals, which often includes factors such as length of investment and how much you want to invest. Every investor will accept varying levels of risk, but a diversified portfolio can offer many risk levels to a single investor. Just like you can personalize the types of assets in your portfolio, you can determine different portions for high-risk, medium-risk, and low-risk investments.

Gain from Multiple Sources

The specialization strategy may seem like a smart idea if you know a particular type of property performs well. Diversification, in contrast, can present opportunities for gains you may not have explored. If you've had a positive investment history with single family homes, you may not know how you can benefit from a multifamily building. Benefitting from multiple sources can offer gains you may never have seen before. Different types of assets within the same class can perform differently based on market conditions.

What are ways to start diversifying your portfolio?

This process starts with defining your investment goals. Every investor varies and is either more or less risk averse. These goals will change over time, so one must regularly reassess and modify your investments as needed.

When diversifying your real estate portfolio, there are several areas to consider. Within these different categories, you can identify various property types, assess the associated risk and develop a diversified portfolio that is in line with your goals.

Property Purpose – The property's purpose will play a significant role in the property's demand and its risk level. Purposes include – Residential, Retail, Healthcare, Office and Industrial. These asset types will interact with different categories to create the level of risk.
Location – Real Estate performance varies across geographical locations, so investing in properties in multiple areas can undoubtedly deliver various results. Location types include – Domestic or Foreign, Regions such as West Coast or Midwest, Urban, Suburban and Rural, and Low-income and High-income communities.There are a few factors to consider when searching high-growth markets – population growth which will point to a demand for a property and also an increase in job opportunities and job diversity.
Tenants – Location and property purpose will point to the type of tenants your property will support. Tenants can reveal how high your rent prices can be, the behaviors you can expect, expectations for upkeep/maintenance and consistency of leases.

To close, there are many ways to employ diversification within your real estate portfolio. Using numerous, diverse strategies across various properties can also influence exposure to risk and potential gains. Some properties are better for a buy-and-hold strategy while others are better for a fix-and-flip. The goal is the same and being diverse allows you to take part in these various strategies thereby taking advantage of certain market situations to help further your gains in the assets in your portfolio. Using a combination of these strategies, property types, goals will help prepare you for market downturns and minimize your risk.

Launching Soon…

Mortar Group's next upcoming investment, the MG East River offering is coming soon. Sign up for their mailing list to learn more about this New York based Value-Add offering once it goes live!

Following their tested value driven formula, Mortar is providing this opportunity to investors by targeting small to mid-cap distressed assets located in some of New York's best neighborhoods. While navigating a challenging interest rate market, select NYC submarkets continue to experience high and stable growth during the last few years. MG East River looks to capitalize on these market dynamics and is expected to provide investors with the excellent opportunity to capture outsized demand in thriving locations with strong local demographics.

In under 36 months, MG East River is projected to deliver a high Cash on Cash Return at exit, with a quarterly distribution targeting over 6%. Mortar Group believes these opportunities represent some of the highest risk-adjusted returns in the current environment. View the MG East River offering here.

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Mortar believes in experience and smarter real estate investing. Their fully integrated in-house design, development, and asset management expertise has resulted in dozens of successful privately syndicated deals. This, combined with skin-in-the-game co-investments and in-depth local neighborhood knowledge, helps Mortar mitigate risk and maximize investor returns. Focused opportunities combined with an intimate knowledge of New York's prime niche neighborhoods allows investors to diversify and deploy capital conservatively in projects and divest risk throughout the real estate lifecycle.

Mortar Group extends white coat investors access to exclusive opportunities on new offerings. If you would like to know more, please visit their website, or reach out to their Investment Relations Manager – Francesca Gaccione at 646-559-9471, or gaccione@mortargroup.com.