Investing in more than one property will not only diversify your portfolio, but it can also set you up for a potential long-term high wealth creation. The more properties you invest in, the faster the growth can build exponentially, but there are strategies that need to be considered. Multi-property investment isn’t for everyone, and it can come with risk, but when calculated and done correctly, the reward can be high.
Define Your Investment Goals: What is it that you want to accomplish with your properties? Does it involve rental income, appreciation, tax incentive, or maybe all of the above? What are the short and long term goals you need from your investments - do you need the immediate cash on cash return or can you purchase a property without immediate payout?
Finances: Determine your budget; accounting for down payments, interest rates, insurance, and costs to prepare the property for what you need out of it. Once you know what you’re working with, secure the financing options such as mortgages, loans or even partnerships. The worst thing you can do in multi-property investment is to overextend your financial package. Lenders won’t continue to lend to you, or you can end up in a losing situation on more than one property, being completely counterproductive to your goals.
Diversification: This is a key component to reducing risk and maximizing returns. It is important to invest in a mixture of property types, including residential, commercial, vacation rentals, etc. and within a variety of geographical locations and market segments. This can also mean diversifying the investment strategy; maybe some are properties you flip, some are long-term rentals, or even commercial properties.
Your Team: Diversifying your investments and geographic location makes it hard to manage every single unit yourself unless you’re in a position to constantly be traveling all over the country. The time and expense of personally managing numerous properties can be shifted to a management company or a strong team surrounding each property instead. Determine who is responsible for making repairs, completing routine maintenance and inspections, collecting payments, marketing, vacancies and leases, etc.
Performance Evaluations: It is important to know how each property is doing on a regular basis. Tracking key metrics like rental income vs expenses, vacancy rates, cash flow and appreciation are necessary to determine if your investment is still a good part of your portfolio. Could you sell a property and use the return to then purchase two due to rapid appreciation or sudden high income? Investing in property is often a long-term game, but there are times when a flip can allow you to further enhance your portfolio.
Focus on the long-term: In most situations, you have to have a mindset of long-term growth when it comes to real estate investing. A sustainable portfolio isn’t created overnight, and it takes commitment and patience. Although it is a fairly simple concept, it definitely is not easy for everyone. Sometimes reinvesting rental income into the property is needed to create a long-term benefit with upgrades or renovations that can increase value. How can you use your current investments to maintain growth and long-term wealth instead of a fast payout? These are all mindset shifts that need to be done for a real estate portfolio to payout in the long run.
By following the above strategies and actively staying involved in your real estate investments, you can build and grow a sustainable and profitable real estate portfolio. The portfolio can create long lasting and even generational wealth that will be sure to pay off in the long run.