You want to keep the cash flow coming in as a real estate investor, and to do that, you will need to continue to increase the properties that you own. So, how do you continue to build your portfolio in a way that is realistic and makes sense?
Purchasing real estate with little investment
A big challenge for new investors is coming up with the cash to invest. There are resources available to you that will help you as a new investor. One of those tools you can use is BiggerPockets.com to find partners and lenders to assist with funding your deals.
If you have done your research as an investor, you already know that you need to diversify and keep reinvesting your earnings. When I say “diversification,” it means both in the number of properties and where the properties are located. When you ‘spread out your wealth’ over a few different sources, you are able to handle unexpected situations that could dampen your performance. When you diversify as an investor it keeps you ahead of the curve.
The other thing to keep in mind is that expenses will generally continue to rise. Taxes, food, healthcare, and housing will go up, and up, and up your entire life. Take this into account. You might achieve your dream lifestyle, but will need to continue to set new goals for yourself.
How many rentals do I need?
The answer to how many rentals you need to be profitable and well-diversified is really a case-by-case basis. It depends a lot on your financial goals. Maybe you simply need ten properties to reach your financial freedom number. Others might need 100 or 1,000 units. It really matters most about what will make you happy.
Over time, you will also go through properties— sell certain ones and trade up to buy others. Old properties need to be replaced with new ones. Neighborhoods could change. You might have an interest in another type of investing. You will need to have a knack for ongoing transactional investing as well as for managing what you currently own.
Difficulties expanding your rental portfolio
When you build up the depth of your investment property portfolio, it takes work and may present obstacles. It’s important to not get bogged down in so many things that you need to do and actually enjoy the benefits of real estate investing. If you don’t pay attention, there is a possibility that you will create more of a full-time job for yourself. When you are an entrepreneur, you may be forced to work all hours of the day and night.
3 tricks to smartly scaling up your rental portfolio
There are three key tricks that will help you realistically scale up the amount of units you have. Pay attention to your system, team, and cash. Your system is the procedures and methods you employ to achieve certain results. The team is who is behind you and working with you. The cash is pretty self explanatory. How much cash do you have on hand or have access to to invest in new properties for your portfolio?
If you move too fast with scaling up your portfolio, you could get yourself in trouble. If you cut corners, you won’t be able to keep things going over the long term. If your process is inefficient, you will miss goals and deadlines. The key that you need to remember throughout the process of scaling up is to remain sustainable. You can scale up quickly, but you will have to do it right. You will need a good foundation, strong team members, and keep a solid mix of your own cash and others investments as well. Maybe there is one on your team who keeps track of finding and landing deals. Maybe there is another who coordinates the closing of a deal.
Hope you enjoyed the content in this article. These strategies are what I personally utilize. Let me know if you have any questions or if I can bring value to you in anyway. I am always here to help!