Owning rental properties is a great way to increase your income. Once you get into the rental property business, you’ll be itching for more.
Here are ten steps for growing your rental portfolio starting now.
1. Evolve with the Market
Landlords and property managers need to always be monitoring the market. As the market moves, you move. Keep a close watch on the rental income in the cities and zip codes you work in. How does it relate to the historical trend? What does the future look like? Are there development plans in the works that will affect real estate in the area? If you don’t have a finger on the pulse of the market, you can’t adjust your strategy for success.
2. Always be Acquiring Assets
The main function of your rental business is to acquire assets. This means you need to constantly be on the lookout for new properties to acquire.
A business that doesn’t grow dies. Your business is renting properties. The market will change. Dynamics will shift. And you need to be prepared.
3. Collect Multi-Family Units
One strategy to prepare your business for market shifts is owning multi-family units. This way, you’re insulated from local trends.
Doing this, you’ll maximize your property’s value. You’ll also make sure the unit is never entirely empty. It’s unlikely all your tenants will leave in one fell swoop.
4. Use the “Snowball Effect”
An easy way to build your portfolio is to start small and get bigger. This is called the “snowball effect.” Roll your investments into one another.
Here’s how it works. You start with one property. You take the income from that property and invest it in another property. Then, you save the income from both those properties and invest it in a third property. Soon, you’ll own multiple properties bringing in steady income.
5. Invest in Technology
One way to grow efficiently is by investing in technology. This means automating.
When you automate, you save time and money. Automation means you won’t have to worry about filing applications or performing credit checks. You can focus on the things that matter–like scooping up more properties and finding more tenants.
6. Start a Partnership
When money is what’s holding you back from building a property portfolio, there are ways around this. One method is by building a partnership.
A partnership allows you to enter into a contract with others. This lets you pool your resources. Then you can buy more properties and share financial burdens. But you need to make sure you protect yourself legally.
7. The C-B-A Method
The easiest way to start building your property portfolio is to follow the C-B-A method. These letters each refer to a type of property.
C-level properties are the least desirable properties you can buy. But they’re the most affordable. When you start your portfolio with C-level properties, you can save to buy a few B-level properties. Then, you can eventually own A-level properties.
8. Let Go of Problem Properties
Property owners need to remember that each property is an investment. You can’t become attached to any single one. When the market shifts and a property isn’t making you money, you need to ditch it.
Sometimes, this is easier said than done. But you must remain ruthless. When one isn’t performing as it should, you need to cut it loose.
9. Diversify, Diversify, Diversify
Your property portfolio needs to be properly diversified like any investment vehicle. This means you want to own properties with different locations, risks and asset classes.
When your properties aren’t diversified, you aren’t insulated from market shifts and downturns. That means your financial future is in jeopardy.
10. Use an Agent Broker
Many real estate investors choose to use agents and large brokerage firms. This frees them from the difficulties of finding properties and closing deals. You need to be smart, though. Find agents and brokers who specialize in your markets and needs.
Following these ten easy steps, and you’ll be on your way to a booming portfolio. Once you grow beyond five properties, you’ll want to invest in a property management software to manage them. Trust us on that one.