In theory, real estate diversification is a no-brainer and common sense. Putting it into practice is another story! Real estate diversification often means exploring new investments you’re unfamiliar with. You may also find putting yourself out there on a deal may make you uncomfortable. For example, if you’re an expert in single-family rentals, buying a multi-tenant commercial property will be daunting.
As with any investment, research, make wise decisions, and protect yourself and your assets. Be sure to explore various types of properties in various markets. Consider networking with experienced investors to gain insights and strategies that can enhance your approach. Hearing how others scaled from zero, like one investor who grew a Building a $12M Real Estate Portfolio from Scratch | Canada, can provide practical blueprints for your own diversification journey. Additionally, leveraging resources such as seminars and online courses can further refine your understanding of the market, ultimately unlocking multifamily investing in Canada. By staying informed and adaptable, you can navigate the complexities of the real estate landscape with confidence.
Commercial Real Estate Investing
Investing in commercial properties is an excellent option if you feel like you have been stuck in a residential property rut. Investing in a commercial property and its unique mortgage requirements can be intimidating if you’ve never done so before. Many investors find the risk to be well worth the reward.
Commercial properties are typically more profitable than residential properties, with higher rental rates. In addition, commercial tenants usually pay the following expenses;
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property taxes
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property insurance
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maintenance costs
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monthly rent
Multi-family residential
Investing in buildings with five or more rental units is a good idea as you grow your investment portfolio. Single-family residential properties can bring in a consistent income, but you risk significant losses if your property becomes vacant. Multi-family residential properties can help you maintain consistent profitability even during months when you have vacancies. Access to the right multifamily mortgage financing makes acquiring these larger assets more achievable.
Multi-family residential properties appeal to a wide variety of prospective tenants. You can accommodate vacancies and evictions by generating continuous demand for your property.
If you’re considering the jump from single-family rentals to a multi-tenant commercial property, book a free strategy call with LendCity to understand how commercial financing differs from residential.
REITs
If you want to benefit from real estate investing without the hassle of hands-on property ownership, you can invest in Real Estate Investment Trusts (REITs).
With REITs, you invest your capital, and the company that owns the REIT handles every aspect of property management and maintenance. Since REITs bring in regular dividends, you’ll enjoy a consistent passive income by adding this option to your portfolio. You might also consider short-term rental property investing as another way to diversify your income streams.
You don’t need a lot of money to invest in REITs—some of the REITs we have found online start with a minimum investment of $1000. Even if you plan on hands-on investing, such a small sum makes sense to own a few REITs.
Also worth checking out is the REIT dividend all-star list. The REITs on the all-star list have consistently paid dividends to investors. This resource can help you choose the right REIT to invest in. You might also explore leveraging stocks like real estate for another angle on growing your wealth.
Joint Ventures
A joint venture partnership is a partnership in which two people decide to purchase an investment property together. It can help diversify your portfolio.
In joint venture real estate scaling, there are generally two categories of investors: the money partner and the active partner.
Money Partner
The money partner supplies the funds needed for any purchase, from the down payment to qualifying for the mortgage.
Active Partner
The active partner does all the necessary repairs and property management.
Splitting the responsibilities between two investors helps reduce your overall investment risk, which is another form of real estate diversification.
Look online or in our private Facebook group for investors who are ready and willing to partner with someone on a new project. The group can be found here.
Real estate Diversification Can protect your investments.
When it comes to real estate diversification, you don’t have to worry about doing everything at once. Start with small steps to broaden your portfolio and gradually build up to increased diversification. Pushing yourself outside of your comfort zone — even diversifying beyond your comfort zone — through real estate diversification will make you a better investor in the long run. And it’ll keep you and your investments safe during headwinds or sudden downturns.
We suggest the following to diversify your real estate investment portfolio for maximum exposure;
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Buy single-family homes in different neighbourhoods — for example, explore Investing in Calgary: Alberta’s Market Guide for Alberta’s cash flow advantage.
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Buy multi-unit residential homes in different neighborhoods
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Buy commercial multi-family properties
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Considering purchasing a hand-off investment like a REIT
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Lastly, invest with a joint venture partner
Investing in real estate can be risky, but the risk is greatly minimized when you learn to diversify your portfolio. Start by exploring residential mortgage financing to understand what options are available for your next property.
Whether you’re splitting a deal with a joint venture partner or adding your first REIT, book a free strategy call with us and we’ll help you structure the financing side of your diversification plan.
Frequently Asked Questions
What is the 3-3-3 Rule in Real Estate?
What is the 4-3-2-1 Rule in Real Estate?
What is the 5% Rule for Diversification?
What Does Warren Buffett Say About Diversification?
What is the 7% Rule in Real Estate?
What is Dave Ramsey's Mortgage Rule?
How do joint ventures help diversify a real estate investment portfolio?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
December 17, 2025
Reading Time
6 min read
Appreciation
The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Cash-on-Cash Return
A metric that measures the annual pre-tax cash flow relative to the total cash invested in a property. Calculated as annual cash flow divided by total cash invested, expressed as a percentage. A 10% cash-on-cash return means you earn $10,000 annually on a $100,000 investment.
Down Payment
The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.
Joint Venture
A partnership between two or more parties to invest in real estate, combining capital, expertise, or credit to complete a deal.
Multifamily
Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
Principal
The original amount of money borrowed on a mortgage, not including interest. Each mortgage payment includes both principal (paying down what you owe) and interest (the cost of borrowing). Over time, more of each payment goes toward principal as the loan balance decreases.
Single Family
A detached home designed for one household, the most common property type for beginner real estate investors.
Passive Income
Earnings from rental properties or investments that require minimal day-to-day involvement. The goal of most real estate investors seeking financial freedom.
ROI
Return on Investment - a measure of profitability calculated by dividing net profit by total investment. Used to compare the efficiency of different investments.
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.
Vacancy Rate
The percentage of rental units that are unoccupied over a given period. A critical factor in cash flow analysis, typically estimated at 4-8% for conservative projections.
Property Management
The operation, control, and oversight of real estate by a third party. Property managers handle tenant screening, rent collection, maintenance, and day-to-day operations.
Short-Term Rental
A furnished property rented for periods shorter than 30 days through platforms like Airbnb or VRBO. Short-term rentals generate higher gross revenue but carry higher operating costs and stricter municipal regulations.
REIT
Real Estate Investment Trust - a company that owns, operates, or finances income-producing real estate, allowing investors to buy shares and earn returns without directly managing properties. REITs must distribute most of their taxable income as dividends.
STR
Short-Term Rental - a furnished property rented for periods of less than 30 days, typically through platforms like Airbnb or VRBO. STRs can generate 2-3x the income of long-term rentals but require more active management, higher operating costs, and compliance with local short-term rental regulations.
Hover over terms to see definitions, or visit our glossary for the full list.