Should You Diversify Your Investment or Focus on a Specific Asset Class?

On the one hand, focusing on a single asset class can make you an expert in the field. You will know the industry inside out and that is valuable. However, I’d strongly recommend passive investors to diversify. Why? Because you will more than likely be safer when the market corrects itself. 

Different asset classes will behave differently in an economic downturn. For example, demand for certain apartments will increase. As we’ve seen with the last crash, many high-end luxury buildings suffered from high vacancy due to tenant migration to more affordable apartment buildings. At the same time, cannabis real estate is very hot right now, but cannabis consumption will decrease if more and more people lose their jobs, so spreading your money over multiple types of investments would be a smart strategy. Nobody has a crystal ball, and we don’t really know what will happen in the next recession, yet spreading your eggs in multiple baskets will serve you well.

Even though diversification is strongly recommended for you, the passive investor, it is also highly recommended to invest with a syndicator that specializes in one (or maybe two) asset classes (unless you invest with a large/institutional company that has the resources to stretch over several asset classes).

Diversifying is not enough. You must take steps to ensure that your investments are prepared for another recession. One way to do so is to focus on the cash flow the property is generating rather than on the appreciation, which can be done by investing in a property that generates positive cash flow from Day 1. Another way to ensure you are investing wisely is to study how that property and the market performed after the last crash. 

Finally, though I do recommend diversification, I do not recommend in investing in single family homes. Many investors think that starting with single family homes is safer than going big and investing in multifamily homes, but the truth is that single family homes are riskier: if you think about it – once your tenant leaves, unless you have another tenant ready to enter right away, you are 100% vacant, which means that you are paying for all costs out of pocket. Since the average cash flow from a single family home is <$300 in most markets, one month of vacancy can wipe out our entire profit for the year. In addition, a single family investing is more time consuming, since you are most likely managing the property on your own.

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About Ellie Perlman

Ellie Perlman is the founder and CEO of Blue Lake Capital, a woman owned multifamily real estate investment firm focused on partnering with family offices and accredited investors to build and preserve generational wealth. Since its founding in 2017, Blue Lake has successfully acquired and operated multifamily assets across high-growth U.S. markets, completing $1B+ in transactions.

At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.

In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.

Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.

Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.