How to Grow, Strengthen and Diversify Your Real Estate Portfolio in 2021 and Beyond

It’s no secret that a large number of investors likely took a hit in 2020.  Thankfully, it’s a new year with new possibilities and the future is looking bright for real estate investments.  In this new year, it is more important than ever to be strategic with your money, and Black Collie Capital is here to help!  There are 7 major asset classes in real estate investment that we will discuss in this article to help you decide the best place to invest your money– multifamily, student housing, senior housing, workforce housing, office, hotels, and industrial. Throughout this post you will learn about which investments are risky, which have been historically safe, and which have proven to be recession-proof. We want to help you be informed about your options so that you can make the best financial decisions when it comes to your real estate investments. As you are trying to strengthen and diversify your portfolio, buying properties in numerous categories and in different geographic regions is a great start to taking advantage of real estate investing opportunities.

Multifamily housing is often considered one of the safest investments in residential real estate, and that has not changed in the past year despite the current circumstances surrounding the global pandemic.  In fact, some previous homeowners are having to sell and move into rentals due to financial strain, making everything from duplexes to apartment complexes a promising investment.  Specifically, the popularity of horizontal multifamily units is on the rise, largely thanks to the more “homey” feel they provide with benefits such as yards, family neighborhoods, and better social-distancing possibilities than with apartments.

Despite a trend of students being more unwilling to sign pre-leases for the Fall 2021 semester than ever before, off-campus student housing maintains high investment potential.  Given the hope provided by the start of vaccine distribution, the outlook for next school year is promising for college admission rates to recover, and those students will require housing.  Renting rooms to college students individually is one way to increase profits compared to leasing out an entire house or space for a blanket price.

As the Baby Boober generation ages into requiring senior living accommodations, the need for more such housing will drastically increase.  In fact, in the next 10 years, the number of residents in senior care facilities is predicted to double from 2016.  Of course, the effects of the novel Coronavirus have hit nursing homes hard, resulting in a lot of possible updates in regulations coming for the facilities.  Investors need to be aware of the impending policy changes and the repercussions they may have on overall profits, but the growing need for senior housing combined with the track record of it being a solid investment shows great potential for above-average returns for 2021 and beyond.

Workforce housing, or ‘missing middle housing’, is in high demand in America today.  Over 50% of Americans currently fall into the category of people for which workforce housing exists, but the supply for such housing is low, especially in large cities where the cost of living is high.  The purpose of workforce housing is to provide affordable housing that is geographically close to middle-income jobs, such as healthcare workers, teachers, and first responders.  This pandemic has exasperated the importance of workforce housing, making it a pandemic-proof investment that has the capability to withstand any economic recessions in the future.

It’s no surprise that the office space category of real estate has been one of the hardest hit by the pandemic.  With approximately 43% of the American workforce working from home due to COVID-19, the need for brick-and-mortar office spaces is lower than ever before.  Historically, office building investments have provided high income, favorable leases, and increased worth.  While some believe that the category will rebound and return to the pre-pandemic value, investing in office buildings would be a risky move at this point in time.

Hotels have been another of the categories hardest-hit by the current pandemic, with occupancy rates as of November 2020 falling over 304% from 2019.  In order for hotels to recover and provide the safe and sanitary experience that customers will undoubtedly expect, many new sanitization processes will have to take place.  Technology will quickly move to the forefront of hotel priorities as travelers value health precautions, such as social distancing, over face-to-face interactions.  Those in the hospitality category who take advantage of tech updates sooner rather than later will have it to thank for their business recovery post-pandemic. The boutique hotel is a great way to start in the

As trends of online shopping continue to shift upwards, industrial and warehouse spaces are in high demand.  With relatively low beginning costs, industrial investment is a great way to grow your portfolio.  Industrial spaces offer diversity, resulting in a more flexible and recession-proof business plan.  Long-term leases, low maintenance, and high yields are all reasons to invest in industrial real estate.

When you are investing your money into real estate, there are many considerations that you must take. The locations of your properties are just as important as the categories they are in. If all of your investment properties are located in high-risk areas that are prone to natural disasters, you run the risk of losing a lot of money very quickly, with nothing you can to do help. By expanding into different areas of the state or country, you will be able to fall back on unscathed properties in the event of a disaster in one area.

As with any investment, real estate investments can be played safe or made risky, depending on the category and other conditions of the deal.  Given the current state of our country and the rest of the world, a huge shift has happened that has shown which investments are more recession- and pandemic-proof than others.  Due to the financial strain that the pandemic has caused, now could be the best time to take advantage of rare deals on properties with a lot of potentials.  By investing your money across multiple categories and separate geographic regions, your real estate investments can withstand the test of time and provide you with a steady revenue stream. 2021 is going to be a year full of hope, resurgence, and fulfillment, and your smart real estate investment can help pave the way to a prosperous and great year!

Black Collie Capital is a commercial real estate finance advisory company that specializes in arranging effective capital solutions for commercial real estate owners and developers. We are providing effortless access to real estate debt & equity financing and facilitate prudent investment decision-making. Working on an acquisition or development that needs financing? Contact Us. Let our experience & expertise help you with your real estate finance & capital solutions needs.