Whether you’re trying to save for retirement or replace your income entirely, building a successful real estate portfolio means eventually expanding it. By placing additional properties in your portfolio, you can earn more profits and safeguard against losses from one or two investments. Here’s a detailed guide on how to properly grow your portfolio.

Set Clear Investment Goals

Before you even start to think about expanding your portfolio, make sure you figure out what your investment goals are. Do you want your portfolio to provide a specific profit amount or ROI? Set numerous short-term and long-term objectives. By setting goals, you should be able to remain focused and motivated.

Once you set goals, you’ll also be able to track your progress and see how close you are to success. While every investor uses different strategies, it’s a good idea to review your progress regularly. Find areas where you can adjust your strategy to more effectively reach your goals.

Consider the BRRRR Strategy for Faster Growth

While there are many fantastic strategies you can use to grow your portfolio, likely the most effective of these is the buy, rehab, rent, refinance, repeat (BRRRR) strategy. Your goal is to purchase a rental property at a price that’s lower than its market value. You’ll then rehab the property before renting it out. The next step involves refinancing, which gives you access to equity that you can use to invest in another rental property.

You have many options at your disposal when you’re trying to diversify. For example, you can focus on multiple asset classes. Along with residential houses, consider investing in raw land, commercial spaces, and office buildings. Avoid putting all your eggs in one basket. If office buildings start dropping in value, your portfolio will be able to absorb these losses because of diversification.

Consider investing in multiple locations as well. Individual cities and areas can experience market downturns for any number of reasons. By expanding your reach and investing in different states, a dip in the economy shouldn’t hurt the value of your portfolio.

If you mainly want to invest in residential real estate properties, buy different types of homes. You can invest in single-family homes, multifamily properties, and condos. Try to balance risk and reward. After you invest in a risky property, buy one that has sound fundamentals and few risks.

When to Apply for a Hard Money Loan

Hard Money Loans are popular with investors for many reasons. If you want to flip a house, you can use this short-term loan to get fast financing. Once you’ve repaired the property, you can sell it and repay the loan without needing to get a traditional mortgage. Since you’ll most likely repair the house and sell it within a year, you don’t need long-term financing.

This strategy is perfect for investors who have found their dream home and want to get cash fast to make an offer that will beat the competition. Hard Money Loans often have a much shorter approval process than traditional mortgages.

• Syndication
• Real estate investment trusts (REITs)
• Buy and hold
• Fix and flip

Develop a Strong Network

As a real estate investor, you’re not going to gain long-term success on your own. To find the right investments and scale your real estate portfolio, you need to rely on others. Build a robust network of people who have a comprehensive understanding of the real estate industry and can give you access to good deals. Your team should consist of the following professionals:

• Lenders: Financing is often required for real estate investments. Whether you’re looking to apply for a hard money loan or a standard mortgage, having a trusted lender on hand means that you can be confident the closing process will be handled with care.
• Agents: Real estate agents can be invaluable when you’re trying to find rental properties fast. They can give you access to homes before they even hit the market. If you want to stay ahead of the competition, you need to have reliable agents in your network.
• Title companies: A title company is needed when the title of a home is being transferred from one owner to the other. There’s a lot of paperwork that needs to be handled during this process, which is why you should have at least one experienced title company in your network.
• Financial advisors: The right financial advisors can help you fine-tune your investment strategies and identify areas where you can reduce your operating costs. They can also give you tips that allow you to lower your taxable income.
• Contractors: Knowing reputable electricians and plumbers can be a boon to your investments when you need to make sure your properties are ready to sell or rent.

Find the Right Markets to Invest In

You can grow your portfolio by finding the right markets to invest in. Search for areas that offer ample variety in the types of properties you can purchase. There are several economic factors that can tell you if a location is a good place to invest.

For example, always be on the lookout for areas with high population growth. When the population in a city or town is growing consistently, this means that more buyers and renters are on the market. If renter demand is high, you can increase your rent price and earn better cash flow. Two other economic indicators that you should keep track of include infrastructure development and job growth.

Studying the market is an effective way to avoid making bad decisions. By understanding local demographics and the amount of competition in the area, you’ll gain insights that can help you measure the feasibility of an investment. Use this research to find undervalued properties and buildings that have a high potential for appreciation.

Scaling your real estate portfolio gives you better diversification and higher cash flow. If you want to begin replacing your income with the profit you earn from your investments, you’ll likely need to expand your portfolio by investing in more properties. If you have specific financial goals, calculate how many properties are needed for you to reach these objectives. Get in touch with us today if have questions about how to finance your real estate investments.