It’s already a common scenario for most investors when asked with the question, “How many properties do you have right now?” to answer with a grin, “one, two?” If you are one of them, can you honestly say that one or two properties are already a good real estate revenue machine for you in the long run?
I’m quite sure you’ll definitely disagree. Why? Because building your career in real estate investing shouldn’t limit you to only one or two properties for a decade or more. In fact, it is highly important to get yourself past property number one or property number two, and even three.
Now, you might ask, “How to do it?” Well, below is a short, yet helpful list of tips which are worth following when you want to grow your property portfolio in the safest and most effective way.
Why most investors failed to grow their portfolio
But, before you scurry down to planning your hundred-million worth portfolio, be reminded first of the reasons why most investors get tied up with their property one, two, or three.
- Not enough disposable income
- Investment trauma and fear
- Wrong mindset
- Not enough planning
- Run out of equity
One of the most common reasons for a stunted real estate portfolio is the fact that many novice investors don’t have enough disposable income simply because of outstanding debts or unnecessary expenses.
When it comes to real estate investing, most people are hesitant to take the first or succeeding steps because of fear of making the same mistake again or fear of trying out and losing money at the end.
Also, some are afraid to take risks, or might have seen negative results in other investors’ experiences such as default rents, or tenants destroying their properties, and so on. These, in fact, can greatly affect you as an investor, especially if you still have a mortgage to pay.
Another strong culprit to not growing your real estate investing portfolio is an entirely wrong mindset telling you that investing is only for those whose ancestors had already established their names in this industry. Some might also say, “You are just putting too much stress on your head, “or something like, “Are you sure you will succeed in this? If not, just don’t do it in the first place.”
Planning takes an important part when investing in properties and growing your portfolio. Many fail to grow their investment because they haven’t thought of being an investor in the first place, making the planning part less important for them.
Because of lack of planning, investors are most likely to invest on properties in less profitable locations. One thing that they should have done is look for reliable real estate resources and online reviews to see if certain locations are strategic enough for their investments.
Buying the wrong properties can also become a reason for your portfolio to get stuck. These properties can either require too much cash from your pocket (may be because of depreciation or repair expenses) or may have already reached their highest advantage for revenue management (still about depreciation).
Practical steps in growing your property portfolio effectively
The following is a list of six practical tips which you can take advantage of when growing your property portfolio.
- Start your investment right
- Create a positive cash flow and learn to leverage
- Take an extra mile learning about real estate investing
- Be updated about the market
- Be aware about your properties
- Get rid of unproductive investment
Buying your first property is a critical step in building the foundation of your portfolio. Once you do it right, buying the second, third, and the succeeding properties will be a lot easier and sooner than later.
Make sure that you study the property and its location very intently and to expect its value to increment within 24 months in order to get back to the market as soon as possible. This is a very crucial thing because failure to do it the right way may lock you up to a decade of unproductive investment.
In real estate investing, you don’t need to always take out cash from your own pocket to buy another property. Yes, it is true that you are limited by your financial capability to grow a portfolio but it is not an ultimate reason why you aren’t growing in any way.
With your first property, leveraging your equity can help you buy a new one. You can either sell the property when its value increases, or you can borrow from its equity to pay the equity for the second property. Just make sure that you don’t overextend yourself with debt, and always place a deposit buffer to save you from some transitory unfortunate times.
With this pattern, you’ll eventually be accumulating passive income that would eventually become your repayment buffers and become part of your disposable income to grow your portfolio.
Well, this article isn’t enough to help you grow your portfolio. According to one of the successful real estate investors and mentors, Helen Collier-Kogtevs, that if you want to become a successful real estate investor, you must immerse yourself into the industry itself, and learn every important aspects until you become aware about the changing trends and strategies.
You can also connect with investment coaches, mentors, and firms such as the Capital Growth Property to teach you how to leverage, create positive cash flow, and grow and sustain your portfolio.
Make market study part of your regular activities as this can help you become updated of the new trend, property life cycles, market equity values, upcoming changes in the rules and regulations that govern the real estate industry, and the behavior of home and property shoppers.
Keeping an eye on your property portfolio at its early stages can save you from lots of loopholes and “blind spots” that might inflict harm on it. Conduct a regular checkup on your property and its incoming cash flow, and make sure that it is improving and growing. If you are into rentals, make sure that you choose your tenants carefully.
When growing a property portfolio, it is advisable that you keep an individual record for each property that includes the history of its physical condition, issues, monthly revenue, as well as an investment plan.
Deciding to grow a portfolio means that you must only be keeping a property worthy of investment. Once you notice that your property isn’t giving you the revenue that you expect, then you need to act…and fast. Any dead investment can incur loss, so get rid of it before it can creep into your entire portfolio.