Portfolio diversification is fundamental to successful investing. This strategy is one of the most common ways to reduce risk without sacrificing potential return.
One way to achieve diversification is by incorporating private real estate investments, also known as private mREITs, into your portfolio.
These investments can offer several benefits, such as:
- Minimal correlation to conventional assets like stocks and bonds (lower risk)
- Potential for higher returns
- Inflation protection
As private lending experts, Marquee Funding Group offers lending solutions for various scenarios, including commercial hard money loans, owner-occupied consumer and business loans, fix and flip loans, and long-term rental properties.
With Marquee Funding Group, investors get access to the expertise and resources needed to successfully diversify their portfolios with private real estate investments.
Let’s take a look at the importance of portfolio diversification, the role of different types of real estate investments in diversification, and how Marquee Funding Group can help investors bolster their portfolios through private real estate investing.
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The benefits of private real estate investments for diversification
Diversifying your investment portfolio with private real estate can offer several advantages, which include:
- Low correlation with traditional assets: Private real estate investments share few characteristics with stocks and bonds, making them an effective tool for diversification and reducing overall portfolio risk.
- Potential for higher returns and income generation: Private real estate investments often provide higher returns compared to traditional assets—as well as generate consistent cash flow through rental income and capital appreciation.
- Inflation protection: Real estate investments have a strong positive correlation with inflation, offering a hedge against rising prices while preserving the purchasing power of your investments.
- Tangible assets: Unlike stocks and bonds, private real estate investments represent physical properties, providing a greater sense of security and value.
- Geographic and property type diversification: By investing in properties across different locations and various property types—residential, commercial, and industrial real estate—investors can mitigate risks associated with regional economic downturns or natural disasters and enhance returns.
By strategically allocating funds across different types of private real estate investments, investors can benefit from the unique advantages this asset class offers while also reducing the overall risk of their portfolios.
Effectively diversifying your portfolio with private real estate investments can be done in several different ways.
Consider the following strategies.
Direct ownership vs. real estate investment trusts (REITs)
Investors can choose between direct ownership of properties or investing in REITs—short for Real Estate Investment Trusts.
Direct ownership provides more control over decision-making, tax breaks, and the potential for higher returns. However, it requires more capital and hands-on management.
REITs, on the other hand, offer a more passive investment approach, with better accessibility for every type of investor.
There are two types of REITs: equity REITs and mortgage REITs.
Mortgage REITs (mREITs) represent distinct investment vehicles that offer investors opportunities to participate in the real estate sector.
Equity REITs primarily channel their investments into income-generating real estate holdings, encompassing various categories such as residential, commercial, and industrial properties.
In contrast, mREITs specialize in directing their investments toward property mortgages, achieved either by extending loans directly to real estate proprietors and operators or by procuring mortgage-backed securities.
Marquee Funding Group’s Capital Fund 1 is, essentially a mREIT that holds mortgage-backed securities collateralized by real estate.Invest with Marquee Funding Group and diversify your portfolio through proven private real estate investments.
Hard money lenders provide financing solutions for various scenarios, including fix and flip projects, refinancing, and acquiring rental properties.
Marquee Funding Group has helped thousands of borrowers achieve their financial goals and capitalize on opportunities in the real estate market that might not otherwise have viable financing options.
One of the key reasons for the success of hard money lenders is their ability to offer quick approval and funding, allowing investors to seize time-sensitive opportunities.
Additionally, hard money lenders often have flexible lending criteria, focusing on the property’s value and potential rather than the borrower’s credit history or financial position.
This enables investors with valuable assets to secure funding even if they have poor credit or inconsistent income.
Moreover, hard money lenders have experience working with a more diverse range of borrowers, including first-time investors, experienced real estate professionals, and foreign investors.
By partnering with a hard money lender like Marquee Funding Group, investors can leverage the expertise and resources needed to successfully diversify their portfolios with private real estate investments.
Investing in private real estate comes with inherent risks; understanding those risks is crucial for successful investments.
Use the following investment strategies to manage risks in private real estate.
- Understand the illiquidity risk: Private real estate investments are often less liquid than traditional assets like stocks and bonds. This means there may be an initial investment lock-up or other restrictions that may make it more difficult to sell or exit an investment quickly. Investors should carefully consider their investment time horizon and ensure they have sufficient liquidity to meet their financial needs.
- Diversify within the real estate asset class: Variances in property types and geographic locations ensure that your investment isn’t relying solely on one type of property in one location. When one location sees an economic downturn, another could be thriving.
- Monitor market trends and economic factors: Keeping a close eye on market trends and economic factors can help investors make better-informed decisions about their real estate investments. This includes monitoring interest rates, demographic shifts, and local market conditions. By staying informed and adapting their investment strategies accordingly, investors can better manage risks and capitalize on opportunities in the real estate market.
Diversifying with private real estate investments can be a powerful strategy for managing risk, optimizing returns, and providing a hedge against economic uncertainty.
Incorporating private real estate investments into your portfolio means you can benefit from the unique advantages this asset class offers, such as low correlation with traditional assets, the potential for higher returns, and inflation protection.
Marquee Funding Group, as experienced hard money lending experts, can assist investors in navigating the world of private real estate investing, helping them diversify their portfolios, and achieve their financial goals.
With our experienced team and expertise in the field, Marquee Funding Group is well-equipped to support investors in achieving their financial goals through private real estate investments.
We encourage you to explore the potential of private real estate investments and consider partnering with Marquee Funding Group to diversify your portfolio and capitalize on the unique benefits this asset class has to offer.Reach out to Marquee Funding Group today to discuss your investment goals and learn how they can help you achieve greater investing success.