The obvious advantage is that if a specific investment does not do well, other investments in the portfolio that are performing better can dampen the overall risk of the portfolio.

In addition, many investors think of real estate itself as diversification, which is true; but within real estate as a broad class there are many options.  By utilizing effective diversification technique an investor can lower the overall risk.

An underappreciated benefit of diversification is that by lowering the risk profile, an investor may be able to actually increase returns.  Of course, this sounds backwards as everyone knows that lower risk mean lower potential returns and vice versa.  

However Modern Portfolio Theory (MPT) has taught us that by diversifying away the individual risk of investments an investor may be able to take on more risk from an overall perspective and thus also earn higher returns