Over recent years, the US real estate market has witnessed promising growth. As a result, many people are turning to property as a worthwhile investment. Interestingly, perhaps driven by the long-term benefits, many investors are shifting from the traditional practice of fixing and flipping property, to securing the long-term and more stable rental assets. While rental assets offer consistent income, you need to own several properties for you to enjoy significant returns.
The challenge, however, is that growing a rental property portfolio requires time, deep pockets, and a proactive, hands-on approach which many property owners lack.
So, how can one grow their property portfolio without breaking their back or the bank? Here are practical pointers.
5 Tips to Growing Your Rental Portfolio
Understand the market
For you to succeed in any business venture, it is important to have a sound understanding of how it operates. The rental property business is no exception; you can either do it yourself or learn how to hire qualified professionals. You need to research and understand the real estate industry, more so, the dynamics of the area in which you wish to own rental units. For instance, you need to be familiar with the housing demands, market rent prices, overall safety and security of the area, as well as the existing laws and regulations on property ownership.
Furthermore, you need to know who the stakeholders and policy makers in the area are, and what major plans, constructions, or upgrades the city planners are likely to carry out in the future. You wouldn’t want to buy a property only for the local authorities to construct a railroad passing through it.
Get a stable financial partner
As stated earlier, you need sufficient funding for you to grow your portfolio. A simple way of getting the finances is to look for a reliable financial partner who will walk with and advise you through each stage of your real estate business growth. Most property owners make the mistake of looking for financiers, who only give out loans, but offer little or no real estate investment advice whatsoever.
Avoid such a mistake and instead go for a financial partner who will take the time to educate you on the different investment options at your disposal, and even extend the credit beyond your current needs. Such financial arrangements will make it easier for you to create levered returns as you scale up in your quest of growing your real estate portfolio.
Get a reliable Property Manager
There is no doubt that the successful running of a rental property needs a lot of time, skills, and resources. It gets more complicated if you have more than one rental unit. Hence, it makes perfect sense for you to identify a reliable and competent property manager to handle the day to day affairs of your investment.
Working with a property manager has many benefits. For starters, the contractor has experience and knowledge of the real estate market, which means that you will enjoy such expertise. Secondly, the manager will handle all the headaches related to rental property ownership, such as vacancy advertising, screening tenants, property maintenance, rent collection, repairs, complying with the legal regulations, as well as handling evictions. Additionally, property managers are conversant with the areas in which they operate. Consequently, they are familiar with the best areas to invest in, the reliable vendors to work with and also the best source of high-quality renters. All these will help you grow your portfolio at desirable speeds.
When looking for a property manager, however, you need to be diligent and cautious or else you might just end up with an incompetent or unscrupulous contractor. Some of the things you should consider about the manager include; His or her level of experience, operating license, membership or certification, referrals from the existing and previous clients, reviews and ratings from customers, as well as accreditation from the BBB.
Manage the operating costs
One of the factors that impede the success of many property investment businesses is the repair and operational costs. As long as these expenses keep recurring relentlessly, you will hardly have enough time or money to think of acquiring more rental assets. Therefore, do all you can to keep these expenses in check.
For instance, you must screen all tenants thoroughly to ensure that you only admit quality renters into your units. Additionally, conduct a vigorous property inspection on any property you wish to purchase. Lastly, bearing in mind that some of these costs are inevitable, you should form the habit of budgeting for the expected and unexpected expenses like repairs, property maintenance, and taxes.
Keep proper Records
You really must have up-to-date records for your rental property. These files will provide useful historical data for decision making. Besides, financial institutions will also need to analyze your documents before they can fund your project. Most importantly, proper records can help you identify the areas where you are incurring unnecessary expenses.