So, you’d like to build your real estate portfolio?
If you’re looking to build wealth, just like America’s 618,000 millennial millionaires, investing in real estate is a solid move. According to the latest report by Coldwell Banker, these successful investors have on average three properties in their real estate portfolios.
If you’re rearing to go, here are the ultimate tips to get you started off in the right direction.
- Establish your portfolio goals first
What is your goal with real estate investing? Are you looking to build wealth or simply looking to diversify your current investment portfolio? Sitting down to establish your goals will help clarify how aggressive you’ll be with your investing. A person looking to build a million dollar real estate portfolio in 5 years will have a different approach to a person looking to build say $200,000 in three years. Make sure your vision is clear.
- Look at your financials carefully
With your vision in place, it’s time to look at your financials. How much can you afford to put down as down payment? Loan-wise, what amount of debt are you willing to accrue in order to reach your goals? Do you have a strategy in place to repay that mortgage to the bank? And if renters default how will you deal with this? Additionally, what will you do in the event that the property doesn’t find renters immediately? These are all questions you need answers to before you take the next step of looking at properties.
- Do your homework before buying
The number of people who buy properties without taking time to educate themselves on the basics is staggering. Properties are like children in a way. They are a full-time job. They require your constant attention. They need to be prepped, invested in, and maintained. When house hunting, do you know what to look for in a property? Things such as the plumbing and electrical circuits can cost a fortune to replace – up to $15,000 for a full house pipe replacement! Ensure they are in good order before making an offer on any property.
- Money is made with the right purchase
Anyone who’s been in real estate investing long enough will tell you that money is made when you buy the property not when you sell. If you can identify a property that’s selling well-beneath its market value, you just might have hit gold. Granted it takes time to find such properties but it is well worth your time to make an effort to look for these prime properties. This is particularly true if you’re not looking to buy and hold, but flip houses. You want a property you can fix up and put right back on the market quickly.
- Improve your property for better returns=
If you’re the type of investor who’s looking to own real estate outright for years and not sell in the immediate future, then it will pay to improve the property so you can charge higher rent. These improvements might be anywhere from renovating the kitchen, remodeling bathrooms, to installing new fixtures. Anything that increases home value will merit an increase in rent. The nicer your property, the more curb appeal it has, the more you can potentially charge for rent.
- Build equity so you can purchase more properties
Our final tip involves building equity. Now, depending on the down payment and the loan taken, it might take a few months or a couple of years before you start earning positive cash flow on your property. However, once you’ve got positive cash flow going, you can build more equity by reducing the mortgage owed. You can then use this equity to obtain a home loan to purchase your next property.
Armed with these six tips, you’re well on your way to building and growing your real estate portfolio.
Would you like to discuss more about building your real estate portfolio with an expert? Contact us for more information.