Real estate investors who know how to buy multiple properties find themselves substantially better off than the rest of the population. Growing a large real estate investment portfolio is something that very few real estate investors achieve. Having a large property portfolio means you get to take advantage of capital growth across a variety of income-producing assets. Plus you get to use the power of leverage to grow a small investment into a larger one.
It is very difficult to achieve financial freedom and secure your future off of just one investment property. But once you know how to buy multiple properties, reaching financial freedom becomes extremely achievable.
Here are the tips you need to know on how to buy multiple properties in real estate.
1. Buy below market value
They say that you make your money when you buy not when you sell. While for most real estate investors this is hard to believe since they are buying properties at market value, this is true for those who buy below market value. Research your market and look for investment properties that you can buy at lower prices. These properties could be foreclosed homes or properties that have been on the market for too long. Look for motivated sellers who are searching for buyers quickly. These types of sellers are always willing to negotiate a suitable price. It takes a lot of research to locate these types of real estate properties but if you find them, you could have instant equity which you can use to reinvest and buy multiple investment properties.
2. Add value to your property through renovation
How does a property gain value? A great way to add value to your property and gain equity quickly is through renovation. Very few property investors look at a distressed property and see its potential. Properties that are in poor condition and need repairs often fetch for well below market value compared to similar well-kept properties because not everyone wants to put work into them. Smart real estate investors add a great deal of equity to their investment property quickly by making renovations that are not so pricey.
3. Constantly get property values reviewed
So many real estate investors who own just one property fail to get their property revalued. Determining whether or not your property has a higher valuation than before can help you if you want to know how to buy multiple properties. Higher valuation means that you now have access to more equity for investing. It’s true that property valuations do cost money but they are often tax deductible. Why not get your investment property revalued if the current housing market is booming?
4. Get a mortgage broker
Property investors who are experts on how to buy multiple properties always recommend that you get a great mortgage broker. Why? Financing investment property is much harder than it was before. That is why having a great mortgage broker by your side will help increase your borrowing capacity and will help you get approved for more mortgage loans. By receiving more loans, you can grow your real estate investment portfolio faster.
5. Get good at researching the market
Buying multiple properties in real estate doesn’t just have to be in your local real estate market. I doubt there are investors who buy every single property on their street. As a property investor, you want to invest in different areas and maybe in different states in order to diversify your property portfolio. It is crucial to know how to analyze and research the area effectively so you know what to look out for. To avoid investing in the wrong location, you need to conduct a real estate market analysis and investment property analysis with the right traditional and Airbnb data.
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6. Stay up-to-date on trends and changes
Always chase the trends in your area. The real estate market is constantly changing and governments are always updating laws and regulations concerning real estate. If you do not stay up-to-date, this can have huge implications on your property investments. For example, if you own a property in a mining town and the government does a huge land release in the area, this can affect the supply and demand of real estate and could cause the value of your property to decline.
7. Create positive cash flow where possible
Your investment property generates positive cash flow when your rental income is greater than the sum of your expenses. If all the properties you buy are putting extra cash into your pockets, then you can afford to service these properties and expand your portfolio. But if your property is generating negative cash flow, you will soon find yourself without enough money to keep the properties running. By having positive cash flow properties, you can use the extra cash to fund the expenses that come with obtaining equity loans to buy multiple properties.
8. Don’t make emotional decisions
The first thing you want to ask yourself when wondering how to buy multiple properties is if that property will give you a high return on investment and cash on cash return. When most people come to buy a property, they make the mistake of mixing up their emotions with the purchase. They love how the investment property looks and feels and tend to overpay. By keeping a level head and always doing a comparative market analysis, you can avoid these emotional decisions and continue to buy multiple properties below market value or at least properties with a solid future growth potential. The last thing you want is to buy a property that “looks” nice only to find out that you are losing your money.
9. Sell To Expand
Just because you want to buy multiple properties does not mean that you should never sell them. There are times where selling makes more sense than keeping a property that is underperforming. Sell to expand, meaning that you should realize when it is time to sell a property and use that money to reinvest in another that is likely to perform better. If your property has all the negative signs of a bad performing property, then don’t wait and hope that someday it will have value. Sell it to buy something with a better rate of return.
10. Use Interest Only Loans
An interest-only mortgage is a great way to lower your weekly/monthly expenses and save up cash flow in order to be able to service more loans for purchasing multiple properties. Principal and Interest loans have larger monthly expenses meaning that you will have to find a way to pay for these loans even if it means taking money out of your own pockets. These extra costs will limit how quickly you can save up money for future investments. By using interest-only loans, you give yourself the best chance of expanding into new properties due to the lower ongoing mortgage costs.
Knowing how to buy multiple properties in real estate is not easy, but it doesn’t have to be hard either. Buying your first investment property will always be the hardest and then after that, you gain experience and purchasing more properties becomes easier. It is a long process and it is not something you will accomplish overnight. However, it is worth the struggle in the end.