Real estate investing has long been one of the most effective ways to ensure financial independence. The wide range of strategies that are available to you coupled with the ever-evolving nature of real estate makes this venture extremely rewarding and profitable. But what is the ideal real estate investment strategy for you? And what is the most effective approach to secure early retirement? In this article, we will discuss a strategy that revolves around buying multiple rental properties over a long period of time. Keep reading as we break this investment strategy down and show you how to buy one rental property per year.
The Benefits of This Real Estate Strategy
Buying a new rental property per year can yield good returns if done correctly. Here are some of the advantages that you can expect if you implement this real estate investment strategy:
1- It is easy to implement
Opting to buy one rental property per year is one of the simplest strategies that you could implement. Unlike other strategies, this one is fairly intuitive and it does not come with a steep learning curve. Novice real estate investors will especially benefit from the gradual nature of this investment approach. After all, slowly building a portfolio over several years is a much more accessible strategy than taking on multiple real estate investments at the same time.
Related: Learn All About the Best Real Estate Investing Strategies
2- The cash flow that you can generate is sizable
The best thing about this real estate strategy is the sizable cash flow that it generates over the years. In fact, buying rental properties that can yield positive cash flow on a yearly basis will leave you with a significant amount of profits at the end of your investment cycle. More importantly, this cash can be used in a myriad of ways. This includes everything from securing your retirement nest egg to financing your children’s education.
3- It is a proven way of building wealth
When it comes to steady wealth building, few strategies can match this investment approach. When you buy one rental property per year, you stand to benefit from a concept called the snowball effect. This is when profits accumulate in an incremental way over the years. Thanks to a combination of rental property cash flow and real estate appreciation, the value of your investment portfolio will soar with little effort on your part.
Related: 8 Simple Steps to Building Wealth with Real Estate
4- It allows you to handle investment loans in an efficient manner
Investment loans are an integral part of any significant real estate investment. Becoming profitable is predicated on the way you structure your loans and pay off your mortgage. When you buy one real estate investment property per year, you have the option of using some of the extra cash flow to pay off each mortgage at a time. If you stick to this approach, you will be able to pay off all your loans by the end of the cycle.
Now that you are familiar with the benefits of buying one rental property per year, let’s go over the perfect formula for buying rental properties.
How to Buy One Rental Property per Year
Before deciding to buy one rental property per year, you must first outline a coherent plan. This is a long-term venture so every aspect of the strategy needs to be defined early on. Here is how you can buy one rental property per year in a few easy steps.
1- Focus on single family homes
Single family homes are the best type of investment property for this real estate strategy. The reason for this is quite simple; These properties tend to be cheaper and require very little down payment. Moreover, single family homes attract serious long-term tenants, which results in consistent rental income. The combination of affordability and high rental income makes single family homes the perfect cash flow properties.
2- Use specialized real estate tools to find profitable rental properties
Finding rental properties that can generate positive cash flow is the foundation of this strategy. This is why it is essential that you use specialized tools that can facilitate the investment property search process. Fortunately, there is a wide array of options when it comes to real estate investing tools. For example, the Mashvisor Property Finder will allow you to search for and analyze the top properties in any housing market in a matter of minutes. Additionally, you can visit the Mashvisor Property Marketplace to access hundreds of off-market listings.
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3- Maintain a constant purchase price range
This is not a requirement, but sticking to a constant purchase price range will help keep your budget and income projections within a reasonable frame. Going for investment properties that get incrementally more expensive will increase your expenditure and cripple your ability to pay off previous loans. Needless to say, this can throw off your initial estimates and prolong the real estate investment cycle.
4- Keep track of the variables that could impact your bottom line
When you buy one rental property per year, there are several variables that you have to manage. Not taking these into account can severely impact your ability to generate a profit. Examples of such variables include increasing maintenance costs, taxes, and depreciation. It’s also worth noting that there are a few variables that can work in your favor. Some good examples of this include equity pay-downs and increasing rent rates.
Related: Rental Management Fees You Need to Budget For
Should You Buy One Rental Property per Year?
As you can see, taking your real estate investing to the next level doesn’t have to involve complex strategies. If you buy one rental property per year, you will be able to build your portfolio in a steady way while paying off your mortgage and generating decent cash flow. Moreover, this approach enables you to keep the level of risk under control and build your wealth in a sustainable manner.
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