If you have been dealing with real estate investments for a few years now, you must be wondering about how to grow your business. While having a rental property with positive cash flow on monthly basis or a couple of thousand dollars invested in a REIT is a great way to make money and supplement your income from your full-time job, why not turn into a large-scale real estate investor with a business worth a million dollars or more? Sounds like a crazy dream? It doesn’t have to be. There are so many ways to grow your business in real estate investing, and you just need to go for the best one. The smartest way to grow as a real estate investor is to own and manage multiple investment properties. Here is why and how:
Why is owning multiple investment properties the best way to grow your business as a real estate investor?
Following are the reasons which make buying more and more rental properties the best strategy to grow your business in real estate investments:
1. Your investment properties will be paying for one another
One of the reasons why constantly buying new rental properties is the best way to grow your business as a real estate investor is that your previous properties will help you pay for the new ones. Once you are done with the payments on a mortgage, you can easily use the rental income and the positive cash flow that come from this property to finance the purchase of a new one. The more investment properties you own, the easier to pay for the next one. Financing is one of the key obstacles in real estate investing, but having multiple rental properties solves this challenge.
2. Real estate investment portfolio diversification
If you grow your business as a real estate investor by buying more rental properties, you will be diversifying your real estate investment portfolio. That’s great. Any investor – regardless of the market and the business – should aim to diversify his/her investment portfolio as much as possible.
3. Less risk
Risk is a major part of any investment, including real estate. You as an investor must be looking for ways to grow your business with less risk. Actually, the more investment properties you own, the lower the risk that you face. What are the major types of risk in real estate investing?
- Vacancies: If you have multiple investment properties, having one of them vacant at a time is not such a big deal. After all, you will keep receiving rental income from your other rental properties.
- Market collapse: Although real estate markets are more stable than stock markets, let’s say, they can still go down and even collapse as it happened a few years ago. However, it is extremely rare that the entire national housing market would collapse. Usually there would be ups and downs within local real estate markets. Thus, if you own investment properties in several housing markets across the US, even if one of them is facing a tough period, your properties in the other markets will keep doing well and make up for some of the loss you experience from the badly performing market.
4. Having more investment properties is less work
If you want to grow your business in real estate investing, keep buying more and more rental properties. Once you have a few of them, you will be able to easily afford employing a professional property management company to take care of your properties. While paying a property manager when you have a single rental is hard to afford, this is a more feasible option for larger real estate investors. So, don’t worry that you cannot afford the time and efforts to own, manage, and rent out multiple investment properties – it will actually end up being less work for you.
How do you grow your business in real estate investing by buying new investment properties?
Great, now that we know why diversifying your investment property portfolio is the right way to grow your business as a real estate investor, how do you do this?
1. Make your investment properties pay for the new one
After you are done paying the mortgage on one investment property, start saving the positive cash flow for a down payment on a new rental property. Once you get mortgage for this new property, use the cash flow from your old properties to pay the mortgage payments for the new one. The more investment properties that you have, the faster you will be able to save up enough for new ones. Actually, you should pretty soon be able to save up enough cash to buy your new rental properties all in cash, to save from the mortgage interest.
2. Look for the best deals
When you want to grow your business in real estate investing, you don’t have to do it by buying the most luxurious rental properties. It’s better to have a few cheaper, less requiring investment properties than one really expensive property that drains all your rental income in maintenance. As a real estate investor, learn how to recognize the best deals in the real estate market and how to hunt for them. Be smart and practical about your investment decisions. Conduct real estate market analysis and investment property analysis.
3. Make use of your real estate network
Every real estate investor must build a solid, diverse real estate network, composed of various real estate professionals and experts. Once you’ve done that, you will find it much easier to find good real estate investment deals, to buy new investment properties, and to grow your business. When looking for new additions to your real estate investment property portfolio, you should always take advantage of your network; that’s an unbelievable source of information and resources.
Real estate experts recommend buying a new investment property every 2-3 years in order to grow your business at a good pace. Although it sounds crazy, it is not impossible. And the more rental properties you already own, the easier it will get to buy new ones. Just follow our advice above. Meanwhile, keep following up on Mashvisor for all sorts of real estate investing tips and advice.