Finding success in a single investment property is a great start to a real estate investing career. But why stop there? Why not consider buying multiple investment properties?
From increased cash flow to decreasing risk in your property portfolio, there is no reason why you shouldn’t continue on the path of real estate investing and buy more investment properties. All you need is a bit of guidance! Here are 5 tips for the real estate investor who wishes to buy multiple investment properties.
Tip #1: Become Real Estate Market Savvy
A real estate investor who already owns a successful real estate investment has some knowledge of the workings of the real estate market. For buying multiple investment properties, a real estate investor has to work to increase this knowledge and understanding.
Choosing the Right Locations in the Real Estate Market
The best real estate investing strategy for buying multiple investment properties is to spread out the income properties across more than one real estate market. This means knowing what a good location looks like in a reliable real estate market.
The Real Estate Market Cycle
Every real estate investor knows that the real estate market has its ups and downs. Knowing when is a good time for buying an investment property is key to expanding your property portfolio.
While it makes sense to buy an income property when the real estate market is experiencing a high, this might not be the best strategy when attempting to add more investment properties to your property portfolio. The reason for this is that when a real estate investor purchases an income property with the hopes of purchasing more, he/she needs to rely on the equity that this investment property provides.
So, purchasing an income property when a real estate market is going through a lull but real estate experts predict it will be hot soon means a quick increase in income property equity. A real estate investor who follows this strategy can then borrow against the increased equity for more investment properties.
Tip #2: Stay Up to Date on All Things Real Estate
While a real estate investor may have knowledge on the real estate market and on real estate investing in general, if he/she doesn’t stay updated on everything that affects a real estate investment, this could mean failure for an income property.
A real estate investor needs to know about any changes in property taxes, zoning laws, Airbnb laws, landlord-tenant laws, etc. Especially when buying multiple investment properties in different locations, a real estate investor has to know how these things differ from one place to another. This isn’t difficult if you read the right real estate blogs (like Mashvisor’s blog)!
Tip #3: Decision Makers = Investment Property Analysis + Real Estate Market Analysis
Nothing should drive the decision of a real estate investor who is building a property portfolio besides logic. Investment property analysis will reveal if each and every income property you consider is worth buying, from the neighborhood to the return on investment potential. A real estate market analysis will let you know if the income property price is right (more on this in Tip #4). No real estate investing decisions should be made without investment property analysis and real estate market analysis.
Buying multiple investment properties? Make it easier by using Mashvisor’s rental property calculator to find and analyze your next income property.
Tip #4: Aim for Below Market Value Prices
As mentioned, a real estate investor whose goal is to buy multiple investment properties should aim for an income property with quick equity growth to borrow against or sell for more investment properties. This category includes any income property that is below market value. A real estate market analysis will aid you in determining if the price is below market value. Here are a few other tips to make this search more successful:
Find an income property below market value now by using Mashvisor to perform a real estate market analysis. Click here to get started.
Look for Motivated Sellers
Motivated sellers are sellers who will willingly sell an investment property for less than market value. A real estate investor can seek out an income property that has been available for sale in the real estate market for a really long time. Investment properties that are nearing foreclosure (Notice of Default) will have motivated sellers, making buying an investment property at lower prices easier.
Consider Foreclosures and Fixer-Upper Investment Properties
Two investment properties with which a real estate investor can easily see equity growth soon after purchase are foreclosures and fixer-upper investment properties. Of course, be sure that the renovations for either of these types of income property will not hurt the overall return on investment. (This is where investment property analysis and a rental property calculator come in handy!)
While the best way to do this is with the help of a professional real estate agent, low-balling offers can be a good strategy for buying an investment property below market value. A real estate investor may even have to give a bunch of offers until the seller is satisfied. Don’t be intimidated by this strategy; it’s better than giving a few offers and missing out on buying an investment property below market value.
Tip #5: Create a Positively Geared Investment Property (or More!)
While not all of the investment properties in your property portfolio need to have positive cash flow immediately, you want to create a positively geared investment property whereever you can. This will ensure that you have the positive cash flow to support the current investment properties in your property portfolio as well as the funding for more investment properties.
This strategy is great for when a real estate investor sees a potential return on investment in an income property that may initially be negatively geared. A positively geared investment property or two can support these investment properties until they too produce positive cash flow.
Buying an investment property is a good start, but no real estate investor should stop there. Work on expanding your property portfolio with more and more investment properties by following our top 5 tips. Enjoy positive cash flow and a great return on investment with multiple investment properties!