Growing Your Real Estate Portfolio
Real estate is one of the most profitable avenues of investment and your portfolio is the collective result of all your properties from houses to apartments to land. More specifically, a real estate portfolio is a collection of your assets and is a comprehensive document that can be equated to a sales resume for real estate investment. Growing your portfolio is a difficult step not many take because it requires a great deal of understanding of the market in terms of capital and leverage as well as diligence. Here are a few steps you can take to get started on diversifying and expanding your real estate portfolio:
1. Become Familiar with the Market
Before diving into purchases, it is important to understand the market you intend to purchase land from, and specifically getting to know your own local market makes it easier to differentiate between desirable and undesirable areas of land or buildings. If you are well versed in your community and understand very clearly and thoroughly where the best schools, neighborhoods, and infrastructure is, you are more likely to get better opportunities and with your elevated knowledge, you can have a more hands-on approach to management. When dealing with property far away, it’s harder to hone in and truly understand the area where your building resides.
2. Understand the 1% Rule
The 1% rule “measures the price of the investment property against the gross income it will generate.” In order to have an investment pass this rule, the monthly rent must be less than or equal to 1% of the price of purchase. Keeping this rule in mind, it makes it much easier to make decisions and accurately determine what avenue your property should take to generate profit. While other factors definitely play an important role in determining a property’s profitability, it is a helpful rule of thumb to get you started.
3. Use Different Methods
Diversifying your portfolio is just as important as any other aspect of real estate investment. Just like the saying, you shouldn’t keep all your eggs in one basket, diversifying allows you to dip your toes in different housing markets and protects you especially if one of the said markets takes a hit and experiences a downturn. With this tactic, you’re sure to have a sense of security in your investments especially if you invest in multiple different types of real estate from homes to raw land to rental homes and more.
4. Consult a Team
Having a team behind you makes larger real estate ventures more doable as your portfolio becomes larger and more diverse. Hiring property managers to oversee the daily actions required of a property owner and advise you on landowner rules. Another important person to have on your team would be an accountant to keep track of your startup financials and taxes. Additionally, having a general contractor and attorney are good steps to take to make for an easier management process.
By following these steps, you are sure to grow your real estate portfolio and expand your knowledge of investment to new heights! Diversifying and growing your portfolio is just the first step to becoming a more involved and advanced real estate investor.