Diversification in Real Estate

Diversification in Real Estate


This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.

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Diversification is a generally accepted method of managing risk. You likely would not invest all of your savings in a single stock, and the same principal is true of real estate investing. However, diversification in real estate is difficult to achieve. Individuals are often limited to their home markets and constrained by available funds to acquire relatively high value assets.

DSTs remove these limitations, enabling individuals to tax-efficiently transition equity from individual properties to diversified and passive real estate investment portfolios.

For example, in a single 1031 exchange you may be able to transition from actively managing a single rental property in your hometown, to having ownership interests in institutional-quality assets throughout the country. Examples may include large scale assets such as an apartment complex in Dallas, a distribution center in Atlanta, or a portfolio of self-storage facilities across the Midwest.

In this example, you may hold ownership interests in many properties, collectively worth hundreds of millions of dollars and achieve meaningful diversification by holding period, investment strategy, sponsor and more.

Diversification is a key tenant of Investment Property Wealth Management®. Proper diversification may allow investors to better manage risk and pursue superior risk-adjusted returns compared to actively managing concentrated positions in local properties.