Investing in real estate is one of the most reliable and profitable investments in many parts of the world. Rental properties are the most profitable because people moving to the urban areas to look for greener pastures require housing. The majority of the city dwellers are not formally employed and do not have enough income to buy homes. As a result, many people in urban areas prefer renting, making real estate business a very profitable investment.
Studies show that many real estate investors own one or two properties and very few are able to grow a real estate portfolio of over five properties. The reason behind this is that many real estate investors do not know how to establish real estate portfolios and they end up satisfied with one or two properties. Well, to those aspiring to invest in real estate and own many properties, here are the basic steps and actions that you need to take to help you grow your real estate portfolio.
Do not take too long to buy your first property
The most important stage when growing your real estate portfolio is to take the first step and acquire your first property soonest possible. Many people take too long to decide and buy their first real property and this makes it difficult for them to build a portfolio of many properties before retiring. It is therefore important to take action and buy your first property earliest possible.
Learn to re- invest your rental income
Many people spend all the income they get from their first property, making it difficult for them to acquire new ones. Remember that if you buy your first property on mortgage, your salary is deducted to pay back the borrowed money. Therefore, chances are very high that you will be tempted to spend all your rental income in order to sustain your previous lifestyle. However, if you want to grow your real estate portfolio, you need to be disciplined, cut your expenses and re-invest some of your rental income to acquire more properties.
Leverage the equity growth of the properties
This is a very effective strategy when growing your real estate portfolio, but you must be very careful to avoid making losses. The secret is to take advantage of the value gained from your existing properties to acquire more. For instance, you can sell your property after it has appreciated and use the money to acquire more. On the other hand, you can borrow against the equity of your existing property and add more to your portfolio.
Try to buy positive cash flow properties
It is important to invest in cash flow properties if you really want to grow your real estate portfolio. Rental properties will give you a positive cash flow because you are sure to get some income on a monthly basis. Remember that when you borrow to buy a property, in many cases money is deducted from your salary to pay back the loan. This makes it difficult to acquire more properties if you do not have other sources of cash. However, if you invest in rental properties, you can use your monthly rental income to pay back your borrowed money and even acquire more properties.
Add value to your existing properties to gain more
Many people are reluctant to add value to their existing properties because to them this is an unnecessary cost. However, what many people do not know is that this is a smart way of increasing their gains and accumulate enough money to buy more properties. You can do some repairs and renovations in your existing property so that they can be more valuable and sell at a profit to buy several cheaper ones. You can also increase rental rates for your properties after renovation and accumulate money to buy additional properties without having to get money from other sources.
Never fear borrowing to buy more properties
One of the reasons why many people are unable to build their real estate portfolio is because they fear borrowing money to buy more properties. However, what many people do not know is that it is economical to borrow and buy a real estate property than using your savings. You can borrow and buy rental property, use rental income to pay back your lenders and end up with more properties in your real estate portfolio. Remember that real estate keeps on appreciating and you can sell the property after it has gained value and use the gains to grow your investment.