About diversification in assets, Warren Buffett, considered by many to be the greatest stock investor of all time, has stated that, "Diversification is protection is ignorance.  It makes little sense if you know what you are doing."  In the portfolio of Berkshire Hathaway (NYSE: BRK-A), Warren Buffett's holding company, the top five positions make up 75% of the total asset value.warren buffett - wide diversification  The same outlook on diversification applies for real estate investing.

There are areas in real estate investing that will always provide opportunities for profit, either through owning rental properties or funding private mortgage notes for buyers.  A private mortgage is a loan from an individual investor or group to finance the buying of a property.  An investor can either finance a loan for a single property or join with others in a consortium that funds private mortgage notes for a number of properties.

Warren Buffett has also stated that, "Our favorite holding period is forever."

A passive, long term approach is also the best way to profit in real estate investing in areas such as where state capitols, major hospitals, and public colleges and universities are located.  There provide a stable base of tenants for those looking to buy rental properties and a solid group of buyers who need private mortgage notes.  Most important of all, institutions such as these are not leaving.

Even though schools offer housing, there are always students who prefer the lower costs and higher amounts of freedom that come with living off campus.  There will also be faculty and staff members looking to rent, too.  Schools will have off campus housing offices that make it easier to find tenants, also.

Much of the same holds true for major hospitals, too.  A teaching hospital affiliated with a university will always need housing for interns, residents, staff members, and medical students, among others.  There will also be other businesses around a hospital, which makes the real estate even more attractive.

That is also the case with the capitol city of a state.  The business that takes place in government creates a strong demand for real estate, both commercial and residential.  Nearby a state capitol will also be located restaurants, law offices, and other establishments that increase the value of the real estate in the area.

It is also more efficient to own properties concentrated in one area.  Maintenance and repair work is much easier.  So is bookkeeping and administrative work.  It also makes the investor more effective the more that is learned about all aspects of an asset.  The more an investor knows about the real estate around schools, hospitals and state capitols, the better will be the returns!

Passive, long term investing is the best way to profit from real estate in these areas (or any for that matter).  If proper research and due diligence is performed, the rental property or private mortgage note will provide a lucrative stream of income.  Rental income generally increases by 4-5% annually.  Private mortgage notes often times yield in the double digits.  

Like Warren Buffett, real estate investors should seek to acquire properties and private mortgage notes that are concentrated only in the most rewarding areas.  To maximize the gains, a long term passive approach is best.  After all, why would an investor want to sell assets that only become more valuable over time?