For some investors, making money in real estate might not be a fulltime job. However, for others, the reason for buying an investment property is to build a successful commercial/residential real estate business. So, how to become rich in this real estate investing business? The answer is simple! The real estate investor should start growing his/her real estate investment portfolio with positive cash flow investment properties. Yet, to succeed in growing your real estate investment portfolio, just buying a rental property and finding tenants is not enough. In order to become one of the most successful real estate investors, there are many steps that you should consider when growing your real estate investment portfolio. Keep on reading to find out what the steps of growing a real estate investment portfolio are like an expert!
#1 Growing a Real Estate Investment Portfolio: Do Not Stop Learning
One of the important aspects of being among the most successful real estate investors is real estate education. Even if the real estate investor has stopped expanding his/her knowledge in the commercial or residential real estate field, the real estate market is constantly developing. Not knowing the new ways of financing or different mortgage regulations, for instance, can slow the process of buying an investment property.
Besides that, new real estate investing tools are being introduced into the market. For example, Mashvisor’s rental property calculator is becoming a must-have real estate investment tool. This rental property calculator will select the best real estate investments with a positive cash flow by conducting neighborhood analysis. In other words, with this tool, the real estate investor will be able to expand his/her real estate investment portfolio faster than doing everything manually. Thus, the goal to become rich will not seem out of reach. You should really consider learning all about the new developments in the field.
Curious to learn more about real estate education? Make sure to read “What Are the Most Important Aspects of Real Estate Education?”
To sum it up, if real estate investors plan on expanding their real estate investment portfolio, they should first consider expanding their knowledge in the field of real estate investing. As many consider drinking coffee part of their routine, especially in the morning, consider reading real estate books, blogs, magazines, etc. as a routine thing as well.
#2 Growing a Real Estate Investment Portfolio: Make Wise Decisions
Be careful! Do not develop your real estate investment portfolio for the sake of expanding it, but do it the smart way! The idea behind investing in numerous rental properties is to become rich by making money in real estate. Consequently, make sure that you put enough effort as well as time into choosing the best real estate investments which will bring you sweet cash in the end.
#3 Growing a Real Estate Investment Portfolio: Select the Right Financing Methods
When planning on buying various income properties or other investment properties, it is always wise to find the right financing method. Let’s explore now!
Leverage Your Real Estate Investment Portfolio
Real estate investors should learn how to leverage their real estate investment portfolio. This is in order to pursue a new project of buying an investment property. In other words, leverage means that the real estate investor is using his/her rental property or another asset to his/her advantage. A real estate investment portfolio, which is a collection of investment properties, can be used as leverage to determine the investor’s credibility when trying to close deals and buying a rental property or applying to gain additional funding.
Different Financing Possibilities
The real estate investor should be familiar with all financing options before rushing in and investing in income properties. Even if you have little or no money, you can still purchase the best real estate investments. How is that possible? First of all, you can turn to your relatives and close friends. The biggest benefit of this financing possibility is the low interest rate if there is any at all. Another possibility is to apply for a hard money loan. When dealing with residential real estate, hard money lenders will be more than happy to lend you the sum. However, be careful as the interest rate will be very high, which might make you think of a refinancing option.
When you have money in your account or enough cash for a down payment, you can apply for a mortgage loan. Depending on the bank (local or national), you may receive a different mortgage loan contract. For instance, you may get better client service when working with local banks. So, study this question carefully. Moreover, if you are not happy with the current mortgage loan, you always have the chance to remortgage in order to get a better deal.
#4 Growing a Real Estate Investment Portfolio: Diversify Your Real Estate Investment Portfolio
Diversifying your portfolio is the way to go in real estate. Why? Here is the answer.
Out of State Real Estate Investing
Want to become one of the most successful real estate investors? Do not limit yourself to one housing market only. Choosing different locations for your rental properties is another way to grow your real estate investment portfolio. Explore various states, cities, neighborhoods, etc. Consider college/university towns as the next destination for your investment property. The reason you should consider out of state real estate investing is simple. If one housing market is about to crash, other markets will continue making money in real estate. Interested to learn more about out of state real estate investing? Make sure to read “When Is Out of State Real Estate Investing a Smart Choice?”
Multiple Investment Properties
Want to be the owner of the most successful real estate investment portfolio? Then it should not only be large but also diverse. Your multiple investment properties can even be located in different real estate markets. However, what is the benefit of having multiple investment properties? When you own investment properties, either in various markets or as different types of real estate, you automatically lower the chance of losing money. For instance, if one of your rental income properties generates negative cash flow, this will not have a great negative effect on your real estate investing career. Moreover, in order to become the best real estate investor, you should consider having a diversified real estate investment portfolio. Interested to learn more about buying multiple investment properties? Make sure to read “5 Tips for Buying Multiple Investment Properties.”
#5 Growing a Real Estate Investment Portfolio: Avoid Costly Mistakes
Knowing what mistakes to avoid and how to invest in positive cash flow income properties is crucial when planning on expanding your real estate investment portfolio. What might these mistakes in real estate investing be? To begin, the real estate investor may neglect to diversify the real estate investment portfolio. Moreover, miscalculating costs when buying a rental property might cause a serious damage to your budget. Failing to recognize when you need to work with a professional management company may seriously diminish your real estate investment portfolio.
#6 Growing a Real Estate Investment Portfolio: Have a Cushion
Do not put all your eggs in one basket! When you buy another investment property, and thus, grow your real estate investment portfolio, it can be easy to rely on rental properties that are successfully generating rental income. However, the real estate investor should always leave a cushion. Consequently, do not drain your resources to the point that your bank account reaches $0 in order to chase the best rental income properties, for instance. The fact that you are able to technically afford it does not mean you should always invest in a certain investment property. The reason being your plan may not work out, leaving you with a negative cash flow property.