How To Build A National Real Estate Portfolio

Expanding your commercial real estate portfolio into multiple states can be a powerful way to scale your business, diversify your holdings, and access new opportunities. You’ll want to have a strategy in place that you can execute. You’ll also find that each region tends to have differences when it comes to regulations, tenant expectations, and market cycles.

When I interviewed Robert Dunn, Managing Director at Fairstead, on my podcast, he shared how his firm successfully built a portfolio of over 25,000 affordable housing units across 28 states. His insights offer a roadmap for investors looking to scale beyond their own neighborhood.

1. Know Why You’re Expanding

Before chasing opportunities across the map, define your reasons for going out-of-state. Are you looking for better cap rates, less competition, or new development pipelines? In the case of Fairstead, their initial success in New York led them to look at other markets. The firm branched into different regions like the Southeast and Texas. Expanding isn’t usually just about volume. You’ll want to think about how you became successful in your first area and how you can replicate that model.

2. Start with a Strong Operational Base

The foundation of any scalable portfolio is operations. Fairstead is vertically integrated with in-house management, construction, and asset management teams. If you're not structured this way, you’ll need to rely on trusted third-party managers. Choose local operators with deep market knowledge and a proven track record in your asset class. Make sure you have regular reporting systems in place, as this will help you stay up to date on the property even if it’s in a different location.

3. Develop Local Expertise in Every Market

One of the biggest mistakes investors can make is to assume what works in one market will work in another. It can vary from state to state, based on factors such as lease enforcement, utility costs, and even tenant expectations.

Establishing regional managers who understand the nuances of their territories can be a game-changer. These team members will help you to stay compliant and find local opportunities. For instance, they’ll be able to offer insight into areas where city officials are looking for partners to revitalize underperforming assets.

4. Know When to Standardize and Customize

As your portfolio grows, consistency will usually play an important role. Create playbooks for underwriting, due diligence, property onboarding, and capex planning. Standardize your financial models, rent rolls, and reporting formats to allow for apples-to-apples comparisons across markets.

At the same time, be ready to adapt to local regulations and market demands. Dunn noted that some of Fairstead’s properties required extensive upfront coordination with public authorities due to past violations or reputational issues. Others were smooth transitions. A flexible, yet structured approach allows you to handle both.

5. Be Patient but Persistent

Scaling a portfolio is a long game. It can take years to move to the level you’d like to achieve. You and your team will likely grow, and you’ll face different issues that will need to be solved. You’ll want to continually place a priority on due diligence before acquiring additional properties.

You’ll also need to build an extensive network through brokers, public partnerships, and local referrals. Be disciplined in your underwriting, and make sure that new acquisitions meet the criteria you’ve established. For some of the most successful investors I know, sustainable growth often means saying no more than yes.

Building across state lines can be an exciting time, as you’ll be able to build a larger-scale portfolio and diversify. You and your team will want to look for ways to replicate your previous success in new environments. With the right systems and strategy, you can create a lasting portfolio that can outperform the market.