Humanity seems to be hell-bent on making more and more babies. While there is nothing wrong with that, an increasing population has created a huge burden on limited resources. Housing demands keep on rising with every passing year, and the need for shelter remains the number one priority of most people. At the same time, this situation has created a huge opportunity for people looking to invest in real estate and diversify their income portfolios. Since housing and real estate have an intrinsic value associated with them, more and more people are jumping on the real estate bandwagon.
But this doesn’t mean that everyone who is looking to invest in real estate will definitely be profiting from it. In this blog, we are going to explain how to multiply your real estate investment portfolio through the use of strategic thinking and design approach. For instance, consider yourself a person who is just a simple house owner and is about to set foot in the real estate market.
Pre-requisites
Knowledge, knowledge, and knowledge! –– Perhaps, anyone who is investing in a new market must know the trends of the real estate market. It requires you to be proactive and an able learner who is ready to spend hours studying how the market is behaving and apply analytical skills to make the best decision that would guarantee maximum profits.
Strong networking skills––Never deny the importance of a strong network in the real estate business. Having access to market players and the right people in the real estate sector can help you go a long way and achieve the financial freedom that you crave. So, go out, meet people in networking events, make new friends, and try to find common ground with potential clients and investors.
Portfolio diversification––Ask any investor and he will tell you never to put all eggs in a single basket. The same goes for real estate. When you are starting new in real estate, you must take one step at a time, identifying which type of real estate investment best suits your needs. But once you have grown your business to a certain level, start diversifying your investments and look for multiple real estate sectors from which you can maximize your profits.
Now let’s come back to the main topic. Ethan Roberts, in one of his articles, writes that although he is 51 years old, it took him only 11 years from the day he bought his first home to become a millionaire by investing solely in real estate. Had someone told him sooner, say at the age of 25, he would have become a millionaire a lot sooner. So, the aim of every newbie should be to start investing in real estate as soon as possible.
Buy, Live, and Sell!
Once you have bought your first house, move in immediately. One thing to keep in mind is what kind of real estate you are buying. If you are buying a duplex, well you can live and rent at the same time, thereby generating an alternative monthly cash flow. Stay at that place for no more than two years. Once you have found a new place to move into, flip the property (make repairs and renovations and sell at a higher profit rate). This will bring the dormant wealth in the form of real estate into motion and make investments in new properties. This technique of real estate investment is usually referred to as “Buy and Hold.”
REITs
One thing to keep in mind is that you should not rely on real estate solely to meet your expenses. Therefore, you must be doing a job that is enough to pay for all your expenses and accommodations, plus savings. Save at least 15% of your income and invest in real estate investment trusts or REITs.
REITs work in the same way as stocks do in companies and corporations. These trusts come in various forms and types. Some make investments in commercial properties such as hotels and corporate offices whereas some look after apartment buildings. In return, the REITs pay dividends or profits based on the amount of investment you make in them. This helps in generating a stable cash flow that you can utilize to make additions to your real estate holdings.
Flip properties
In order to triple your initial real estate holding of one house, look into other means to multiply your cash flow. Flipping properties is one of the ways from which you can expect a sizable return on considerably smaller investments. Oftentimes, you will come across properties that sit in affluent neighbourhoods but lack several amenities and give an unpleasant vibe that usually drives customers away. Don’t be let down by this because this dilemma is a blessing in disguise which one can use to turn into a profitable venture.
After buying properties in a precarious condition, carry out renovations from the bottom up. Bring in architects, engineers, and craftsmen to bring life back to this unit. Once ready to be listed on the market, give your real estate agent the green signal. While this strategy is a quick way to make significant wealth, one should always keep in mind that the cost of a property plus the renovations should not exceed the amount in which you are planning to sell the property.
Stacking
The above-mentioned steps will let a person develop a considerable size of income which can be used to multiply total income and make lucrative real estate investment decisions. Therefore, once you have set your finances straight and you are ready to achieve financial independence––it’s time to stack. Do it yourself or hire a property manager to scale your real estate investments. Stacking will allow you to multiply your holdings exponentially. If you have one apartment, multiply it into two using the steps mentioned earlier in the article. When you have two, multiply it into four and so on. Keep in mind that real estate investment requires patience of many years and a pragmatic strategy to ensure success. So, if you are willing to invest in real estate, do it now no matter what your age is.