You don’t have to work super hard to build an impressive property portfolio. You only have to be smart.
But we know being smart in real estate demands a lot of trial and error, as well as money, time, and expertise.
So, we’ve cut the long route short for you. In this post, we’ve shared four effective tips to help you develop an impressive real estate portfolio quickly and easily.
1. Educate yourself
Most real estate agents begin their journey as a side hustle. They jump into the field without any formal education and that’s okay. Real estate is one of the few profitable fields of work with minimal prerequisites.
However, formal education about the industry, finance management, marketing, and investing strategies can help you beat your competition easily. It can cut down the time, effort, and money you’d otherwise spend learning all of this stuff (via trial and error).
Therefore, we recommend attending property training events, investor summits, and gatherings to acquire knowledge from more experienced investors. Alternatively, you can invest in coaching sessions or mentorship before you take major decisions.
2. Build an online presence
It’s 2022, and no business can survive without an online presence. Whether you’re a solopreneur or a team of skilled individuals working towards one goal, an online presence is a necessity for success.
So, create and maintain profiles on real estate websites like Zillow, Realtor, Redfin, etc. Along with these, join social media groups and forums relevant to your niche and keep an eye on current trends. Engage with potential buyers as well as senior and fellow investors. Get to know them, build relationships, build communities, and access newer grounds of opportunities.
In case you’re wondering what these opportunities could look like, consider the following:
- Joint real estate investment ventures
- Joint profit investments (in digital assets or other goods)
In this way, you’ll establish a reputation in the market and become truly independent. As you build yourself an online brand, you won’t depend solely on a real estate agent to bring you good deals and customers. You won’t have your property sitting around empty. You can use social media to find your next tenant on the same day. And you’ll save a lot on marketing costs!
3. Develop a cash flow strategy
Cash flow refers to the movement of money into and out of your business. And for investors, maintaining a positive cash flow can be tricky.
As you receive rent from your rental property or receive cash when a property sells, it may look like you have a positive cash flow. But it’s not always true.
Cash flow depends on the following:
- Gross income from the property
- Total expenses of the property
- Debts associated with the property
Therefore, we recommend keeping a close track of incoming and outgoing cash. It can help you set your pricing accordingly and eliminate any chances of negative cash flow.
As a general rule, you should charge 1% of the property’s purchase price to develop a positive cash flow strategy. For example, if a property costs $450000, you should charge $4500 for the best returns in the long run.
However, the area and taxation policies relevant to the area impact the 1% strategy significantly. So, collect all necessary data before you set the pricing.
Other strategies to develop a positive cash flow include:
- Adding value to the property by renovating it
- Cutting down operating expenses
- Raising rents to market level
You can learn more about cash flow here.
4. Focus on one property
Investing in multiple properties is one of the most common portfolio-building mistakes in real estate. So, stop! You don’t need to invest in ten different properties just yet!
Instead, focus on one. Even if you have a huge amount at your disposal, begin with a safe investment and scale it further. Practice your profit-generating skills, and invest 70% of available funds only when you’re confident that you’ve ample industry knowledge and experience to lead yourself.
Let’s consider an example. Say you purchase an investment property from your tappable home equity amount, which is approximately 70 percent of the available home equity. (Note that you cannot use your entire home equity for investments, as explained in this article).
Now, divide the amount into 2-3 halves and purchase a property worth 1/3rd or 2/3rd of the total amount you have in your hands. In this way, any potential losses wouldn’t cost you your financial stability. Plus, they’ll leave you with experience and confidence for your future dealings.