Owning multiple investment properties is not the easiest thing to do. However, this does not have to be the hardest thing either. Keep reading to learn why multiple investment properties is the best real estate investment strategy!
First, let us talk about the pros and cons of owning multiple investment properties, and then we will give you some tips for success.
The pros of owning multiple investment properties
Make money: Every real estate investor’s goal is financial independence. It is hard, however, to get it when you are investing in one property. Though it is advisable for beginner real estate investors to start with one property, they will have to grow their real estate investment portfolio eventually. Multiple sources of positive cash flow are indeed the ultimate way to grow wealthy in real estate investing.
Diversification: It simply means that you can purchase properties out of state and make sure that you do not invest in one location. Imagine if a hurricane hits your investment properties at once. That alone is a disaster!
Spread the risks: Nothing is better than knowing that if one rental property is doing bad, you can still depend on your other investment properties. This makes investing in multiple investment properties the best real estate investment strategy to mitigate the risks.
Sell to pay debt: With multiple investment properties, you always have the choice of selling one property to pay the debts. Thus, selling the investment property that generates the least rental income makes sense.
Appreciation: Appreciation is the best part of real estate investing, especially for residential real estate investors. Knowing that you will have multiple investment properties that have gone up in value makes it worthwhile.
The cons of owning multiple investment properties
There are two main concerns of owning multiple investment properties. The first one is that properties are not liquid assets. Therefore, it might take a while to sell them, especially if you are forced to do so. Second, property management gets harder for multiple investment properties. Unless you are a full-time investor, you will have to hire professional property management to take care of your multiple rental properties.
Tips on buying multiple investment properties
Consider properties below the market value
There are plenty of investment properties that are selling below the market value. Do proper research and analyze your options. Keep in mind that owners do not always sell their properties for less because they are damaged. Sometimes, they sell to pay their loans. So, be smart with your research and make sure you do not fall for the first option.
This will also help you build equity instantly, and, therefore, buy more investment properties.
Add some value to your investment property by renovating it
If you are investing in rental properties, then consider doing some renovations. Improving the state of your investment property will add to its value. You can also add some extras, but beware not to overspend. Just a few improvements will do the job in increasing your cash flow.
Perform real estate market analysis
When buying an investment property, a real estate market analysis is important. Study the area, and compare the value of your investment property to others. You should focus on investment properties that are similar to yours. In this way, you will be able to accurately determine the real market value of your property. Moreover, you should perform a real estate market analysis every once in a while to make sure that your property is doing well.
Get the right financing
There are plenty of financing methods available for real estate investors. This is especially true for residential real estate investors, since getting a loan is easier for them. Proper research is the first step to finding the right financing method for your investment property. Make sure to put 20% for down payment. If you do not have that much money, then look for other options with less down payment requirements. All in all, you should find the right broker. This will help you maximize the capacity of your borrowing and, as a result, help grow your real estate investment portfolio faster.
Stay up to date with the market trends
Stay up to date with laws and regulations associated with real estate investments. Almost every year there are changes in laws, tax rates, and area regulations. So, make sure you know what the real estate market looks like for your investment properties.
Look for positive cash flow properties
When buying an investment property, focus on positive cash flow properties. These are also known as “positively geared properties”, which simply means you will have some extra money at the end of the month to keep for yourself. As much as possible, stay away from negatively geared properties. The last thing you want is to have multiple negative cash flow properties that will drain your pockets!
Keep emotions out of the way
Owning multiple investment properties is no joke! It is a business, and it must be treated as such. Keep your emotions out of the way, and think logically. Do what is best for your own real estate investing business even if you don’t like it.
Sell when necessary
If you face a financial crisis, you can always sell a couple of properties that are not doing so well. Do some proper analysis and sell a property when necessary. Do not keep properties that cost more than what they earn you. You can also choose to sell if you want to expand your business. You can sell a property in order to buy two investment properties instead. So, keep your options open and study them carefully before you take action.
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