Investing in rental properties can generate substantial financial rewards. With a steady stream of rental income, you can make improvements that increase the value of each property. However, making handsome profits investing in rental properties is not as easy as it sounds on real estate infomercials. It takes focused dedication not only to make money but also to grow your rental property portfolio.
Let’s review several tips that can help you grow your rental property portfolio, as well as produce a higher cash flow.
Back to School
Well, not back to school in the traditional sense. Instead, you want to educate yourself about the following rental property topics:
- Create a real estate investment plan
- Complete a real estate market analysis
- Complete an investment property analysis
- Understand state and municipal real estate laws
- Locate rental properties that generate positive cash flows
- Select the right type of financing
- Know how to screen potential renters
- Calculate the return on investments
- Assign a value to property improvement projects
- Learn the implications of real estate transactions on taxes
Growing a rental property portfolio also requires you to stay on top of business, finance, and economic news. Refer to trusted online sources of business, finance, and economic news like the Wall Street Journal. Attend real estate seminars that discuss the latest hot topics affecting investors.
Above all, try to find a mentor who can walk you through making difficult investment decisions.
Forge a Partnership
Investing in rental properties involves plenty of cash. You might use the cash flow from one property to invest in a second property. Yet, many rental property investors do not have the financial resources to grow their portfolios. The best way to expand your rental property portfolio and expose less of your money to risk is to forge a partnership with another investor.
A real estate partnership with another investor also reduces the amount of work you have to contribute because you have a partner to split the responsibilities associated with managing a rental property. There is another solution to reducing your responsibilities when it comes to running multiple rental properties.
Contract with a Rental Property Management Company
You’ve heard the phrase, “I can’t be in two places at the same time.” Managing a rental property is a full-time job, and then some. From screening potential tenants to performing regular maintenance, you have little time left over to invest in another rental property.
The solution to your time dilemma is called a rental property management company.
Here’s what a highly rated rental property management company can do for you:
- Screen tenants
- Handle tenant complaints
- Established fair market value rent prices
- Take care of all accounting tasks
- Make repairs and complete maintenance projects
- Organize rental property social events
- Promote the rental property in the community
- Implement real estate digital marketing strategies
- Enforce lease violations
Growing a rental property portfolio takes time. Free some of your time up by contracting with a reputable rental property management company.
Work with a Real Estate Agent
We’ve already mentioned the importance of collaborating with a partner that brings financial resources to the investment table. Now, you should consider collaborating with a real estate agent. A state-licensed real estate agent that has compiled an impressive record of investing in rental properties can help you make good decisions on the road to expanding your rental property portfolio.
Most real estate investors do not have formal training to negotiate deals. Instead of handling the negotiations on a rental property by yourself, lean on a professional who has considerable experience negotiating favorable contracts. An experienced real estate agent can also suggest ways for you to grow your rental property portfolio, as well as advise you on rental property improvement projects.
Diversity Your Rental Property Investments
One of the traps some rental property investors fall into involves applying a cookie-cutter approach to investing. They search for similar types of rental properties to invest their hard-earned money. Thinking outside the box for rental property investors is to consider a wide variety of rental properties. For example, a rental property owner of two brownstone buildings located in a major city can diversify the rental property portfolio by searching for a sprawling apartment complex that has the potential to flourish in a suburban community.
You should also diversify by expanding a rental property portfolio to include commercial properties. Commercial tenants provide more stability, as they are more likely to sign leases that run longer than one year. Investing in a commercial rental property is an excellent strategy for diversification when the economy is strong or is on the verge of a rebound.
Start Slow with a Neighborhood That You Know
The first couple of rental properties should be located in areas that you know well. You can even sink money into a rental property that sits across the street from your home. However, growing your rental property portfolio will eventually require you to look outside of your comfort zone. Makes sure when you expand into unfamiliar areas to talk to neighbors, small business owners, and other property investors.
The Bottom Line
You have to remain realistic when growing your rental property portfolio. This means you aren’t going to strike gold within a few months by making several investments. Rental property investment follows the lesson taught to us by the tortoise and the hare.
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