Within a real estate portfolio, diversification can take the form of holding different property types (residential and commercial), different locations, or properties targeting different tenant or buyer profiles.
Concentrating capital in a single property or micro-market increases exposure to risks specific to that property or area, whereas a more diversified approach spreads that risk, though it also requires more capital and active management to execute.
For investors with limited capital, diversification may need to happen gradually over time and across multiple purchases rather than within a single transaction.
