Building a real estate portfolio is one of the best ways to earn passive income, but where do you start?
Real estate is an industry that most people get involved in, often when buying a home for the first time. However, you can dive further into the industry by building a real estate portfolio that generates income.
Before buying a property, you must know how to search for one that’ll suit your needs if you want to avoid wasting money. To help you, we’ll teach you how to build a real estate portfolio so you can start earning money and protecting your assets source.
Read on to learn about the steps to build a real estate portfolio!
Start with a Budget
Building a real estate portfolio starts with setting a budget, which many overlook. When building a real estate portfolio from scratch, your budget will help you decide which properties you should start with. Aside from that, it’ll prevent you from spending too much time researching something you can’t afford.
Many people get into real estate by taking out mortgages for new houses. However, it’s best to save the money to buy a property outright, so you don’t face high interest rates.
If you’re planning to get a mortgage, you’ll need to calculate how much you’re eligible for. Do this by getting a mortgage pre-approval at any lender.
Know What You Want
After setting a budget, the best way to build a real estate portfolio is to decide what you want. While many new investors know they want to get into real estate, you must figure out which types of properties you’ll buy.
Building a real estate portfolio can be done with apartments, houses, condos, storefronts, and more. If you know exactly what you want, you’ll have an easier time looking for properties that’ll suit your needs.
Keep in mind that each property comes with different benefits. For example, buying an apartment allows you to house many tenants and collect monthly payments. Buying a house will enable you to accommodate only one family, but it’s much more affordable than an apartment building.
Do Your Due Diligence
You should always do your due diligence (research) whenever you want to invest in something. For example, if you buy a property without researching the market, you won’t know whether better options are available until you’ve already spent money.
Every area’s real estate market is different, so you should also decide where you’d like to start. With a location in mind, start searching for various properties to learn more about much they’re going for. If properties in one area seem too expensive, look at surrounding locations.
In many cases, properties are more expensive when they’re known to generate income. Buying a storefront in a place like New York City will cost much more than buying one elsewhere because there are more people, which means more sales can be made.
Demand also affects property prices, so you’ll need to determine whether the area you’re interested in is in a buyer’s or seller’s market. When there are more sellers than buyers, you can expect to see property prices drop significantly, which is a great time to buy.
Invest in Different Things
A traditional belief in the world of investing is that you should never put all of your eggs in one basket. In other words, you shouldn’t invest all of your money into one thing.
Learning how to build a real estate portfolio will require learning how to invest in other things. If you have all of your money in real estate, you’ll likely lose it all if the market ends up crashing. However, spreading your money into other things, such as the stock market, will ensure you still have something.
Cut Losses When Possible
Another thing you should do when building a successful real estate portfolio is cut losses when possible. If you invest in something and realize that you’re not making any money from it, you should get rid of it.
When it comes to real estate, this will involve selling the property, often for a lower amount than what you paid. While it isn’t pleasant to lose money, know that it comes with investing, so you need to get comfortable with losses.
Hire a Property Manager
Out of all the steps to build a real estate portfolio, one of the most important is hiring a property manager. With a property manager, you’ll have someone to handle various tasks for you, allowing you to focus on other things.
Property managers often handle tenant payments, property repairs, and more. When hiring one, you can have them manage all of your properties or just one.
If you’re investing in one house, you may not need a property manager. However, they become more important when investing in apartments because you’ll need someone to work with tenants full-time.
Start Building a Real Estate Portfolio Now
Now that you have a better idea of how to build a real estate portfolio, it’s time to start yours! The first step is to set a budget, then everything else will fall into place.
Keep in mind that when you’re building a real estate portfolio, you must go through each of these steps if you’d like to ensure success. By referencing this info, you’ll have no problem finding properties that suit you and can help you build wealth.
To learn more about real estate and investing, check out our other articles!