Beginning

The majority of investors think they are doing well because they have property.

But ownership is not a strategy.

Lacking portfolio management, countless investors actually expose themselves to significantly more risk, less liquidity, and less level returns- not to mention long-term anguish. This is particularly the case in real estate investment, where decisions are high-value and long- term with limited reversibility.

If you’re buying property with no real plan, you are not investing. You are reacting.

What Portfolio Management Really Means?

Portfolio management is the administering of multiple investments to attain a specific goal.

In real estate portfolio management, this means determining:

• Does each property receive similar capital investment?
• Which are intended for growth versus stability?
• How we preserve liquidity throughout the portfolio?
• How risk is divided between places and time?

In the absence of a portfolio, investments stand alone. With them, they function as a unit.

1 Property is not a portfolio

You do not have a portfolio if you own only one property, no matter how good it is.

A property portfolio is not constructed if every asset has a job. Some properties are geared towards long-term upside. Others for rental income. Some provide liquidity. Some balance risk.

Without investment and portfolio management, investors tend to be over-concentrated in a single asset or one market cycle. When that cycle decelerates, the financial plan comes under strain.

What Is Risk? Unmanaged risk is the actual risk.

Every property investment carries risk. It’s not the risk of risk per se that damages investors, it is the unmanaged use of risk.

Investors often make the following mistakes without real estate asset management:

• Overweight in one city or micro-market
• Choose similar property types repeatedly
• Tie up too much capital in illiquid assets

Risk is mitigated and reduced by the incorporation of properties across markets, property types and investment horizons.

Liquidity Berth Is Ignored Until It Hurts

Liquidity is perhaps one of the most under-considered factors when it comes to real estate investing.

Absence of portfolio planning can result in investors tying up all their cash reserves into long-term properties. They wind up losing the farm whenever an emergency, opportunity or some market change arises and they are pressured into selling the farm on unfavourable terms or borrowing money at favourable conditions.

The ideal real estate portfolio is aligned to:

• Long-term appreciation assets
• Excitable assets when needed
• This stability guards flexibility and peace of mind.
• Timing Is Not a Strategy

Some investors seem to spend infinity-in-waiting, waiting to get in on a “perfect time.”

Portfolio management is about time in the structure, not timing the structure. Instead of, “I just have to know that this is the right time?”, the portfolio manager inquires, “Is there any accretion to the portfolio with this investment?”

This way of thinking eliminates second guessing, over analysing and led by emotions choice making.

Emotions Quietly Destroy Returns

Fear and greed in real estate are expensive.

People who do not manage their portfolio with real estate:

• Hold poor assets for too long
• Exit strong investments too early
• Panic during market slowdowns
• Overcommit during bullish phases

Portfolio management introduces discipline. The decisions are made with allocation, balance and long-term goals in mind, not short-term noise.

You and Your Investments Should Change Together

Investment needs change over time.

What works at one stage of life may not work at another. Income grows. Responsibilities increase. Risk appetite shifts.

A good long-term investment plan is all about managing and maintaining, not blowing up. This flexibility is also in the nature of portfolio management.

What You Miss Without Portfolio Management

In the absence of a portfolio-led approach, investors end up confronting:

• Overconcentration in one location
• Poor cash flow planning
• Limited exit options
• Opportunity costs of a TIE up capital locked up in them
• Stress during market volatility

Problems like this are almost never bad properties. They occur as a result of no structure.

Final Thoughts

Portfolio management is not about picking the best investment.

It’s about making worthwhile every real estate investment; nothing should exist for no reason.

If well-invested and managed, risk is manageable, liquidity increases and long-term growth becomes calculable. Even its good assets can be confusing and regret-inducing without it.

What you lose without portfolio management is not really opportunity.

You are missing control.

Frequently Asked Questions (FAQs)

Q1. What is 'real estate portfolio management' in layman's terms?

It's the act of building and managing a portfolio of property investments that are inter-reliant rather than existing independently.

Q2. Is portfolio management necessary only for large investors?

No, Portfolio management is beneficial from the very first property. The structure is more important than the size of the investment.

Q3. Is it even possible to mitigate real estate risk through portfolio management?

Yes. Risk cannot rendered to zero, but through good portfolio management, it’s managed amongst several locations, asset types and timeline.

Q4. Does portfolio management limit profits?

It might drive away the extreme highs, but, it also greatly dampens the destructive lows. Steady gains frequently trump volatility with time.

Q5. How can a real estate portfolio be sized relative to other asset classes?

Liquidity protects you from having to sell assets, under duress. Long-term holdings and exit-friendly assets are balanced in the portfolio management.

Q6. Can someone really manage a portfolio when most of their money is in real estate?

Yes. Real estate stands to gain massively from portfolio management as assets are inherently long term and require significant investment.

Q7. How frequently should you review your property portfolio?

No less frequently than annually, or whenever they experience a major change in income needs, objectives, or market.

Q8. Can one time exercise be done for portfolio management?

No. It’s a process that needs to be nurtured and developed as markets – and personal circumstances – change.

Q9. What does a portfolio manager do?

An investment portfolio manager assists investors in maintaining objectivity, preventing over-exposure to risk or loss scenarios, and achieving balance as well as avoiding emotional decision making around investments.

Q10. What is a mistake that investors make because they lack portfolio management?

Overconcentration. Concentrating too much investment in one place, one type of asset or even one cycle of the market.

Next Steps

If you are investing with no structure, portfolio management is not an option.
Talk to us Learn how we can bring clarity, balance and long-term assurance to your investment agenda with a portfolio-led real estate strategy.

📞 Click To start the conversation.

Disclaimer
This article is for information purposes only and does not constitute investment advice. Market risk: All investment is subject to market risk. Investors are advised to perform their own due diligence prior to considering an investment in Excelsior.