Real estate investors understand the importance of building and growing a real estate portfolio. The first couple of investment properties bring excitement and opportunity and you begin to wonder if you can keep it going. Whether you are just starting out investing in real estate or have been doing it for years, you likely understand that investing in properties carries both risks and rewards. Here are some ways to grow a real estate portfolio carefully to try to minimize the risks and maximize the rewards.
Strategy and Research
Devising a strategy is a good business practice and can also be used in building your real estate portfolio. When devising a strategy, its best to think about what goals are most important to you. Your strategy will be based around those goals. For example, if you are investing in real estate to boost your monthly income, you may consider comparing rental rates and property management costs to mortgage prices and determine if renting out an investment property would truly bring in more monthly income for you. If you are interested in investing in real estate to use tax write offs, you will want to research topics like mortgage interest, property taxes and property depreciation to get you started down the right path. If you are purchasing properties to fix them up and sell them, one of the most important things to research is the housing market in the area. If you must renovate or remodel and distressed property, make sure you do your research on contractors and shop around to get the best price.
Financing and Lenders
It is important to go over your cash flow and expenses before considering growing your real estate portfolio. This is many times where people will make mistakes. It’s important to have stable cash flow to deal with any unexpected surprises on top of any new investments. Of course, no one can predict the future but having funds in case of an emergency is safer than moving on to your next property before you can handle the curveballs that may come with it. Leave yourself wiggle room and truly examine your finances before growing your portfolio. Consider the state of the market and don’t forget to factor in taxes because they can be a large part of a buying decision. Be sure that you have financing arranged before shopping for your next property. Pay cash if possible because it will give you more room for negotiation and your offer will be perceived as more valuable. If you are using a lender, calculate the down payment and use funding responsibly. Speaking with a loan officer can help you down this path.
Develop a Great Team
With so many steps involved in real estate investing, having a great team of people on your side can mean the difference between sinking and swimming. Having a trusted property inspector, contractors, team of lenders, real estate agents and other investors to bounce ideas off or seek advice is key. It’s always a better experience to learn from other people’s mistakes then to have to experience them on your own.
Because real estate investing can be so time consuming, working with a franchisee gives you an advantage because you already have a team of people who want to see you succeed. When you partner with us, we both the resources and a team of mentors ready to help you get started on the right path. Contact us or attend one of our webinars for more information.