Real Estate Portfolio Advice: Start small.
Don’t worry if you don’t have much money to invest—most investors don’t. Even if you want hundreds of multifamily properties, invest within your means. Start your portfolio with two local single-family homes. Creative financing is also fine. Crowdfunded real estate can assist you invest in property if you don’t have enough.
Contemplate exponential portfolio growth
Exponential expansion should be your first property investing plan. Exponential expansion just multiplies. Real estate exponential expansion involves aggressively buying, updating, and refinancing properties to buy more. This can yield substantial ROIs far faster than if you buy one home and wait to save before buying another, which might take a long time. This article describes the BRRRR real estate exponential growth approach.
Know your market. Real estate investors need this. West Coast and Midwest housing markets differ greatly. Knowing your local real estate market goes beyond understanding house prices.
Is it a family or young professional neighborhood? How’s the job market? What rentals can individuals afford? These questions can help you identify investment properties in your preferred location.
Better yet, make an Excel spreadsheet (yes, really). Identify all the main markers of investment success and track your investment properties annually. Investors should document all property analyses. Incorporate taxes, upkeep, and other return-affecting considerations. Keep track of your financing sources to show future lenders that you have a solid track record and are low-risk for another loan.
Save your numbers—they’ll help you make smarter judgments.
Look into funding
This is crucial for real estate investors, especially those who may not qualify for a mortgage. If you don’t have enough for a downpayment, you may still be able to finance your investment property. Hard money or fix-and-flip loans may work. Specialized lenders, not mortgage lenders, give this loan secured by the investment property. Consider real estate crowdfunding platforms that offer fix-and-flip loans.
The 1% rule: essentials
Want to know if your real estate investment is worthwhile?
Use the 1% rule first.
How does the real estate 1% rule work?
Your investment is fine if its rent is equal to or less than its purchase price.
Portfolio Goal
How fast do you want to increase your property portfolio? 15 years? Or 5? Before starting, know your goals. A defined goal will help you choose homes to invest in. Wholesaling is best for short-term profits. Single-family and multifamily residences are good long-term investments.
Investing
Real estate asset allocation is risk-based. Do you want to risk investing in low-value properties that need a lot of work for faster returns or play it safe? Asset allocation should match investor goals.
Portfolio manager?
Next, determine whether to handle your real estate portfolio yourself or hire a management company. Outsourcing portfolio management will cost more, but if you’re new to investing and have numerous properties to handle, you may struggle. A management company is improbable if you start with one single-family home. As your portfolio increases, consider it.
Why invest in real estate?
Real estate is still a great investment. Building a real estate portfolio is a terrific method to create wealth quickly and protect your future. Selling your assets is unlikely to lose money because real estate usually appreciates.
Finally, a real estate portfolio is a great way to earn passive income. Successful real estate investing can give you more time to pursue other interests.
Traditional real estate portfolio building
Beginner real estate investors slowly buy rental properties. One house first. Another house? A few years later, another. They’re adding assets slowly to increase their portfolio.
Always remember that scaling real estate is basically the same as using ‘the stack’ when you’re either buying or selling real estate. But it may not work where rental agreements are in play. When rental properties are the main investment it’s best to let your traditional lender, such as your bank or mortgage company, handle the tax details and federal and state regulations. They are set up and trained for that kind of complex transaction.
“The Stack” Increases Wealth Exponentially
You buy one house this year. Finish. One home.
The first deal is hard, and one deal doesn’t mean freedom. Yet it does teach. After a year, buy two units. A duplex or two single-family homes. Wondering how the money came?
Can you repeat next year? You own three units. Four? You buy a fourplex or two duplexes after learning from your prior deal. You double to eight units the next year. Each year, you refine your systems. Your new network simplifies property finance.
Daniel