A real estate investment portfolio can include anything from a single-family home to a 50-unit apartment building or more, plus everything in between. But, how exactly do you start from nothing and create a portfolio that provides passive income and even wealth? We’re glad you asked! Today, let’s look at some simple but important tips for building a real estate portfolio that will serve you well now AND in the future.
7 Tips For Building Your Real Estate Investment Portfolio
#1: Start Small So You Can Learn the Ins and Outs of Real Estate Investing
If you’re new to the real estate investing world, you’ll find out that there’s a lot to learn. While you don’t have to know everything before you begin, it can certainly help to start small and build from there. For example, rather than starting out with a 20-unit apartment building, you could begin with a single family property that includes 1-4 units. That way, you can learn the process as you go and the mistakes you make along the way won’t come with as big of a price tag attached to them!
#2: Learn Your Local Real Estate Market
Even if your eventual goal is to have a real estate investment portfolio that includes properties in other states or across the country, it’s often wise to start in your own backyard. That’s because you already know more about it than you would about other markets and your proximity to the location makes it even easier to learn more. Knowing things like which neighborhoods are popular, what areas have the best school systems, and whether there are any planned commercial developments nearby can all help to give you an edge as you seek out the best properties.
#3: Form Relationships With Local Real Estate Professionals
While you may know your local area pretty well, that doesn’t necessarily mean you know what deals are already on the market and which ones are about to be on the market. When you develop solid relationships with real estate brokers or real estate agents in your local market, you may be among the first to know about hot deals or special properties that you would want to add to your real estate investment portfolio.
Here’s a secret about real estate investing that not everyone knows: Often, the best properties never even make it to the market.
Rather, they’re sold behind closed doors to preferred investors. In order to be a part of off market real estate deals, it’s important to get in the know based on the people you know!
#4: Learn How to Get Financed For a Rental Property
Obviously, building a real estate investment portfolio will require some serious capital. And, unless you’re flush with cash, that capital typically comes from a bank or other lending institution. You’ll need to have a decent credit score, have some sort of down payment and be able to prove your income. Then, it’s time to research your financing options.
#5: Know Your Numbers
Once you know whether you can afford to purchase a particular property, it’s time to run the numbers and see whether or not it’s going to be a profitable investment.
- Are there improvements that will need to be made in order to get the rent you need or want?
- What do the operating costs look like?
- How much will insurance and property taxes be?
- What income will this property need to generate in order for you to realize positive cash flow?
For further details on exactly what to look for, watch this video here: How to Run the Numbers on a Rental Property (In Under 5 Minutes).
#6: Document Your Real Estate Investment Journey
Whether you’re brand new to real estate investing or you’ve been around the block a time or two, your ultimate success in building a solid real estate investment portfolio will depend on the lessons you learn along the way. The best way to remember those lessons is to document your journey. That might include simply taking notes and keeping them in a binder, writing a blog about your experience, or even creating videos about mistakes made with real estate investing.
#7: Evaluate, Repeat, Grow
Now that you have at least one property in your real estate investment portfolio, it’s time to evaluate the process and your end results. You can ask yourself questions like these:
- Was the process easier or more difficult than you expected?
- What worked well and what would you change the next time around?
- Does this feel like a wealth building tool that fits well with your goals and personality?
- Did you end up with a favorable property purchase?
- Are there any changes you need to make to your income, credit, or overall loan worthiness in order to be able to get financed for another investment property?
- Do you want to stick with single family or are you ready to tackle the world of multi-family investing?
Once you’ve answered these questions and your evaluation is complete, it’s time to repeat the process with any changes you identified during your evaluation.
Achieve Financial Freedom With Your Real Estate Investment Portfolio
When done the right way, you absolutely can create a real estate investment portfolio that not only brings you passive income but also allows you to have true financial freedom. My wife and I have become successful real estate investors in metro Detroit simply by following the tips mentioned above time after time.
In fact, we went from owning $0 in real estate to $5 MILLION in real estate by age 30. Want to learn exactly how YOU can do that, too? Subscribe to my YouTube channel to learn from our journey and be the first to get my latest real estate investing tips and tricks. Welcome to the wonderful world of real estate!