If residential rental real estate is a part of your investment portfolio, you may wonder if and when there is a right time to grow your portfolio.
Of course, given that every investor's goals, risk tolerance and comfort regarding cash-to-debt will vary, there is no slam dunk answer. But, you are not the first person to invest in rental properties, and there are a few tricks to the trade.
Here are a few things to consider when thinking about growing your portfolio.
If having the ability to reinvest in new properties consistently is important to you, longer-term – typically 30-year – mortgages typically help keep regular payments low, and thus, more cash on hand for other investments.
Invest in Yourself!
If you are serious about growing your portfolio, then reinvesting the recurring profit from your existing rentals is essential to success.
It's pretty simple math. If, for example, you have five properties that result in a combined $2,000 in profit each month, then, rather than using that income for more extravagant living, save until you are ready to invest in a new property. It's advice as old as time – be frugal! Even without considering earned interest, if you save that $2,000 per month, it will be $48,000 in two years, which is a nice down payment on your next property.
Network Network Network
Networking is essential in any aspect of real estate, but especially for those hoping to grow their property portfolios. Having a solid network of realtors and lenders will help you find and move fast to close on properties.
Along with realtors and lenders, it is also important to have a fundraising network. Banks will look at your debt-income ratio when considering whether or not to loan you money for another property, so having alternate sources of funding, like a self-built investor network, will be essential as your portfolio grows.
Very few property investors start by buying a 50-unit multi-family property or ten duplexes in one fell swoop. Instead, starting small with one property and slowly acquiring more properties will allow you to learn the ins and outs of successfully investing in and managing your investment portfolio.
Consider Geographical Diversification
In today's modern world, investing in and managing a rental property from afar is easier than ever. In addition, having properties in multiple areas of the country will help ensure your investments are less susceptible to matters out of your control, like large employers shuttering their operations, hurricanes, or other large-scale events greatly affecting a market.
Always Look for Better Financing
The idea of refinancing existing mortgages is a major stressor for many homeowners. But, when considering property ownership as an investment, it is necessary to look at your loans and consider financing options regularly. After all, the more money that stays in your pocket means more opportunity to invest in other properties.
Be Prepared for Repairs
Like it or not, investment properties require upkeep, and you won't want to be caught unprepared when emergencies arise. You may have a year or more of good fortune and not need to put up significant money to maintain your investments. Still, issues will arise sooner or later, whether it's the need for a new HVAC system, water heater, flooring, or all-out renovation. So, when considering how much to reinvest in your property portfolio, make sure to maintain a healthy balance for maintenance and repairs. They're inevitable.
Hire a Professional Property Manager
Utilizing a well-established property management firm will allow you to focus on growing your portfolio rather than screening residents, collecting rent, dealing with maintenance issues, and much, much more.
As a leading property management firm in the Cape Fear region, Sweyer Property Management certainly recommends that property owners strongly consider working with a trusted and experienced property management company. Additionally, we want to make sure property owners and investors understand the relationship they are entering into when choosing to work with a property management firm.
If you have investment properties and do not use a professional management company, we hope you consider doing so. The experts at Sweyer Property Management will be happy to provide you with a free rental analysis or, if you prefer, give us a call at 910-239-1338.
Sweyer Property Management is a full-service professional property management company specializing in all aspects of rental management. If you're an investor or property owner looking to learn more about our services and what a professional property manager can do for you, reach out to us today at 910.256.3031 or via our website. Sweyer Property Management has exhibited continuous growth throughout the Wilmington, Leland and Hampstead areas while maintaining an excellent Google+ rating for customer service.