Whenever any regular person thinks of investing in real estate, he/she will start thinking of getting their first investment property. Thinking about the first rental property is the spark that can give any real estate investor a start in the crowded world of real estate. Buying your first investment property is the first step that any real estate investor must take to grow his/her real estate investment portfolio.
Investors must keep in mind that making money in real estate happens gradually, just like growing your real estate investment portfolio. Most successful real estate investors began their journey with little or no money; it’s not about what you begin with, it’s about what you make with what you have.
Related: Owning the Most Profitable Investments in 2018 Real Estate: Education Vs. Experience
What must real estate investors keep in mind to grow their real estate investment portfolio in no time?
Planning
Before diving into any new ventures, real estate investors must be well-prepared to make decisions that they think will help with their financial prosperity. On the other hand, going into real estate unarmed and without a plan can result in making incorrect decisions, which can lead to financial losses.
Most successful real estate investors create a vision which helps them come up with objectives that can be constructed into plans. These plans, when done correctly, can bring the real estate investor’s vision to life. In order to grow your real estate investment portfolio, you must create a vision of what you think would be the best real estate investment portfolio for you and make decisions that bring you closer to that vision.
A major part of planning your real estate investment portfolio lies in doing the math for your real estate investments. If you want to know how to get rich in real estate, it is as simple as mastering the math of investing. Math in real estate is essential as it is needed to calculate the financial aspect of an investment. The most accurate way to spot the best real estate investments and make safe and reliable financial decisions is through conducting a thorough comparative market analysis and investment property analysis to ensure that you are getting your money’s worth.
Mashvisor offers an extensive package that includes a comparative market analysis. Such tools are available to all real estate investors nowadays, all thanks given to technology advances.
Related: Become an Expert on Comparative Market Analysis With Our Guide
Figure out your finances
The first step in knowing how to buy an investment property is securing financing for any said property.
Assessing your financial situation and finding creative ways for financing can jump-start your real estate career. As previously noted, getting rich through real estate requires real estate investors to master the math of investing, which can be interpreted as the financial aspect of investing. Creating a financial plan to adhere to can be done in numerous ways. One way that beginner real estate investors always rely on is securing financing through relatives or people in circles of trust. Going to a friend or even multiple friends for a loan if you don’t have enough money for a down payment on a property is not a big taboo in this case. Make sure to explain to the lender what the money will be used for and assure him/her that the money will not be blown away on anything other than investing.
Having a down payment for a first property is the key that unlocks your real estate investment portfolio. To give you a clearer image of how you can turn this single down payment into multiple properties, many real estate investors buy their first property, rent it out, then start looking for another. This is the way it should be in most cases if you’re looking to grow a real estate investment portfolio. Having your first investment property can solidify your credit situation. Therefore, any equity you have in that first investment property can be used to get a home equity loan, which an investor can use to buy a second investment property.
Related: Buy a Second Investment Property: Why and When?
Diversify your real estate investment portfolio
To exploit the potential of any investment market, investors must diversify their investment selection. Having diversified investments can lower risks and increase returns. Creating a diversified real estate investment portfolio requires investors to dig through multiple investment strategies to find a complete understanding of the factors that can differentiate properties. A real estate investor must diversify his portfolio geographically, type-wise and holding period-wise.
Having geographically-diversified investments can mean many things in different perspectives. It could mean different neighborhoods, different cities, or even different states. Having investment properties in different locations such as New York City, Los Angeles, or Washington DC can generate a geographically diversified real estate investment portfolio.
One of the most common investment strategies is to diversify the types of properties you choose to invest in. This means not limiting yourself to one kind of investment property and instead, owning different kinds of investment properties that can generate a constant income under any circumstances. A real estate investment portfolio is considered diverse when the investor owns and operates different kinds of rentals, such as office rentals, single family homes, multi-family homes, or even storage units.
Another measure that you can create a diversified real estate investment portfolio through is the holding period. Most real estate investors are interested in buying low and selling high as a means of making money in real estate. The buy-and-hold investment strategy is one as old as time and it makes sense that successful real estate investors have diverse investment profiles in this regard. A real estate investor must have short-term holding periods, mid-term holding periods, and long-term holding periods within his/her investment portfolio. Each type of hold has different layers of risk and return which can create a secure and stable financial portfolio.
Related: Diversified Investments in Real Estate: A Basic Guide.
Take learning on as a constant friend
What makes successful real estate investors different from others in the field is their ability to stand up after any failure they encounter and learn the right way to tackle any obstacle. The best advice given to any real estate investor, especially those starting to branch out to create a real estate investment portfolio, is to keep learning. Keep learning through books, websites, conferences, meetings, and blogs. Learning is essential as no market stays the same. Learning about any factor that affects real estate values can come in handy when you need it. Deep knowledge of the real estate market can give the real estate investor the expertise to spot great off market properties and turn any leads into actual investments.
To conclude
The real estate investment market is a crowded market that forces real estate investors to create sustainable real estate investment portfolios that are also diverse in order to reap the benefits of it. Following these steps to grow your investment portfolio may require some time but it doesn’t take as long as you’d think. Some investors have made it happen in less than 3 years. It’s not just about knowing how to buy an investment property, it’s about buying an investment property that fulfills your investment vision.
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