Grow Real Estate Portfolio

7 Tips on How to Grow Your Real Estate Portfolio

Looking for a way to ensure your retirement is comfortable? Interested in building a portfolio of real estate that ensures you always have a constant stream of income? Buying the right types of properties, and following a few simple tips, will help ensure that you’re able to grow that portfolio and safeguard yourself against the vagaries of the economy over time. The tips below will help ensure you’re able to make smart decisions about your real estate investments.

Do You Have Positive Cash Flow?

One of the most important tips here is to make sure that you actually have positive cash flow. You shouldn’t have to rob Peter to pay Paul, so make sure that you’re in a stable position with any other properties owned before you move on to purchasing another property. Maximize the income potential for the properties you hold currently before you expand your portfolio, or you could miss out on important financial gains, or overextend yourself.

Check the Math

The numbers need to make sense in any real estate transaction. If you’ve been investing for more than a little while, you’re aware of how quickly things can change, and you understand the types of challenges most likely to crop up during this period. It’s fine to run hypothetical numbers here, but they should only be used for general forecasting. You need accurate math to make real decisions.

Management

How will you manage the new property in addition to the other properties in your portfolio? If you have a management team in place, this will likely not be a problem, but if you don’t yet have a team (you’re a new investor), you need to have a plan in place for managing all aspects of the property you’re purchasing.

Diversification Matters

This is probably one of the most important rules of investing, and it applies to real estate just as much as it does to anything else – diversify. Look for a mix of different property types. Don’t put all of your money into large, multi-family developments, or all of it into residential real estate. The right mix will help improve the value of your portfolio, but more importantly, will help provide protection in the face of market fluctuations.

It Makes Sense for You

Avoid the trap of buying a property simply because you like it, or because “it’s a great deal”. Sure, you might be able to get a particular piece of real estate for less than it is worth, but does that make sense for you? Does it offer specific value to your investing plan? Is it logical? Buying for the sake of buying is a trap that you need to avoid, as it just ties up your capital, possibly without a corresponding return on your investment.

You Have a Cushion

Never invest in any real estate if you’re not going to have a cushion left over. If the purchase of one property will leave you without liquid capital, forcing you to rely on the income generated by other properties for your living expenses, it might be wiser to hold off.

Use Leverage Wisely

The ability to purchase real estate with debt (or leverage) is a powerful incentive to get into the game, but it can be a two-edged sword. Leverage can be a valuable tool, but you need to ensure that you’re using it correctly. If not, do not use it at all.

Growing your real estate portfolio doesn’t need to be complicated, or fraught with pitfalls. Follow these simple tips and maximize your growth while safeguarding yourself from potential problems.