This upcoming year, set up your property investments for success with this real estate portfolio guide.
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Long-term investing can lead to passive income and ROI, especially when it comes to rental property investments. Not only does this appear to be a great arena for investors at the moment, but it can be a step toward consistent passive income for the long run. That is not all your investment will bring, either.
With rental properties, investors often get to experience everything they are looking for – and that’s cash flow, portfolio diversification, appreciation, leverage, and equity growth. It is one of those investments that, as long as you do your due diligence with the particular property and market, it just makes sense.
If you want to make the most out of your real estate portfolio, you need to look at your investing as a business rather than a side hobby for some extra cash. You need to come up with a ‘business’ plan, set some goals, and give yourself some direction before you even start. Discover various criteria that will allow you to monitor your progress so that you know whether you are getting the most out of your investments – or if you need to make some changes going forward.
Today, we are going to look at all the steps for success in this real estate portfolio guide.
Preparing Yourself For Your Future
Getting started in managing rental properties doesn’t just happen overnight. Well, it could, but that’s not usually how wise investing occurs. There is prep work that should be done to help you feel confident that you are moving in the right direction – and are making sound decisions about your investments.
Consider following these steps.
Before you begin building your portfolio, you need to define your goals for your investments. What is it you hope to achieve with the investment – are you going to continue to work or looking to replace your job with this investment? Is this for retirement-building? Are you looking for financial security? It is important to know what you are working towards so that you continuously have direction.
Of course, setting goals for your returns is important, too. How much you are looking to make from your investments will determine just how many properties – and what type of properties – you may need to invest in.
2. Collecting Your Funds
Before you can start investing, you need to have the funds to do so. You don’t necessarily want to strap yourself for money to make that first purchase, but rather find ways to invest that can cause less stress to your life. For instance, work for a better credit score so you can obtain a loan with a low interest rate, rather than depleting your savings in hopes of making good on your investment.
Take a hard look at your personal financial situation, then do some research to find the best way for you to invest in rental property.
3. Build a Network
You can jump into rental property investing alone, but you may choose to work with a network. When you have a network of other investors, property managers, vendors, real estate agents, and the like, you have access to lots of knowledge and skill that you may one day need to tap into. These professionals all come with experience that can be beneficial to your investments, both now and in the future.
Growing Your Portfolio
The next step in our real estate portfolio guide is to grow your portfolio. Once you have gotten started in your investments, you may hang tight for a while – or you may decide it is time to push yourself toward growth. Again, this isn’t something that happens quickly. It takes a few calculated steps on your part. Let’s take a look.
Many investors look to diversify their portfolio so that they can lower their risk. For example, they may focus on different housing types, such as multi-family investing and single family investing, as well as in different housing markets. Consider all the trends of different areas and keep your investment options open and diverse.
You cannot just jump into investment without a strategy – and expect to be successful. Instead, you need to decide how you would like to invest so that you can best grow your portfolio. In real estate, some investors find flipping houses works great for them. While home improvement shows make this look easy, you may want to take a deep dive into all that is involved before you make a final decision.
Other investors simply prefer to take things slow and consistent with rental properties. As we said, you can still diversify your portfolio by choosing different types of properties in different markets – while still only focusing on rental properties.
The Health and Value of Your Investments
Once you are ready to make your investments and start to build your real estate portfolio, you cannot just assume that a good deal in a good neighborhood will be a great rental. You need to do some looking at the numbers to determine whether the investment is going to add value to your portfolio – or if it will drain it.
1. Run the Numbers
A few of the things you will want to look at when it comes to rental property investments are the cash flow (the amount you will bring in after expenses) and the cap rate (the returns you’d have if paying cash).
2. The 1% Rule
This calculation will help you determine if the investment is a good option. You calculate the initial cost of the investment with the necessary expenses to have it ready to rent. What is 1% of that amount? If you can’t rent the property for at least 1%, then you may want to re-think the purchase.
Managing Your Properties
With this real estate portfolio guide, you can set yourself up for success. As you take the time to put together your portfolio – including building your network, getting your funds together, learning about available markets, and so forth – why not make life easier with a highly-experienced property manager that will help you focus on your investments?