Given that the more rental units you own, the greater the income you generate, the smart thing to do is to increase your rental properties. Learning how to choose profitable rental properties is key to this growth. Even when one or two units are unoccupied, you’ll still have other rentals to fall back on for steady monthly earnings.
As a strategic investor, you need to research the available real estate in-depth to maximize your opportunity to expand your property portfolio. Retaining a tenant is also essential to maintaining steady income as you grow.
This article will cover strategies for expanding your portfolio and provide useful tips on researching the best real estate. Keep reading to learn more!
Why Should You Increase Your Property Portfolio?
If you want to receive more income, then it is wise to adopt a diversification strategy by growing your investments. Know the right properties to invest in so you can enjoy the property appreciation over time. You can also use leverage to finance new real estate to grow your portfolio faster.
A distinct advantage in cultivating a robust rental portfolio is making the most of economies of scale, which allows you to streamline processes and create more efficient systems.
Owning several rental units allows you to save on maintenance costs by hiring the same contractor. You can also create ads at a lower price and negotiate for a better fee with a property manager.
How to Build a Rental Portfolio?
To avoid getting overwhelmed, it is best to break down your goal of growing your rental portfolio. You can plan your real estate investment by looking at specific, measurable, achievable, relevant, and time-based (SMART) goals.
Then you need to figure out the risk level you are comfortable with to ensure you use the correct strategy. Know why you want to increase your property portfolio and what your financial goals are.
Before pushing through with purchasing a property, you also need to evaluate the following critical factors:
- Location
- Property type
- Available financing options
Rental Property Mix
It is advisable to have a diverse set of properties rather than picking only one property type. This way, your target market is broader and you also reduce your risk. When the market demand changes, you can count on either your commercial or residential property to produce an income.
Some rentals such as vacation homes may have a high demand during the holidays while rentals near schools will also be sought-after during the school season. It is best to have rentals that will buffer the slowdown of renters during off-peak periods.
Making A Real Estate Investment Plan
You need to have a proper plan to achieve your goal of growing your rental portfolio. Note what strategies, objectives, and financing alternatives are available to you. Upon completing the list, you can take action and move forward with your goals.
How to set SMART Goals
Before setting a rental business plan, you should create SMART goals by
- Creating a budget for new real estate investments within a certain period
- Closing a fixed number of real estate listings quarterly
- Growing your network or team
- Deepening your knowledge of the real estate market
When your goals are specific, it is much easier to succeed and monitor your progress. To deepen your understanding of real estate, you must dedicate time to researching and comparing different properties. Assessing the risk you can take is also part of the process.
Tips for Researching Your Real Estate
To decide better when investing in properties, you must develop a solid knowledge of the local property market. You must be involved with your community to learn about the market changes, including development plans in your area.
This helps you:
- Discover the best deals
- Assess the best value of any property offer
- Calculate the real interest rates and property taxes to be paid
- Know the strategic price for a property purchase
- Identify the best strategy for growing your rental portfolio
- Assign the right monthly rent for prospective residents
- Compute for rental operation costs, including estimated management fees
Here are the crucial factors for evaluating the local market:
- Rental rates
- Vacancy rates
- Property types in high demand
How to Build and Manage Your Rental Portfolio
There are three things to keep in mind when focusing on growing your rental portfolio.
- Diversification: this strategy is crucial if you want to reduce your risk by balancing your property portfolio. Aim to have a mix of different properties to avoid the effects of a volatile market and potential financial loss.
- Scaling your portfolio: this strategy helps you chase after great investment opportunities by utilizing your earnings from one rental unit to pay for the down payment of another real estate. Reinvesting your profits helps you gain ROI on new property investments.
- Property management: To succeed in the rental industry, partnering with a committed professional property management company can be a sound decision. The team can help you maintain the upkeep of your rental space, collect the rental promptly, conduct property inspections, advertise vacant rentals, and more.
Bottom Line
Having a good mix of single-family homes, apartments, and condo units can fortify you against risks. You also stand a better chance of earning a stable income and maximizing your property appreciation.
You can start by taking time to research the local market and being aware of which properties are sought after. By doing this, you can reach the best decision on what property to invest in.
If you need an expert point-of-view to grow your rental portfolio, contact
MTD Property Management today!
Blog
