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Real Estate Portfolio: How To Build and Scale

Aerial view of real estate in residential neighborhoodAre you wondering if it’s possible to develop your real estate portfolio from a single rental property to owning five to ten properties within three to five years? Many of us have heard stories of property investors who claim to have successfully done that, but how do they do it? While many factors play into the outcome of your investments, some guidelines can be followed that will help bring you closer to your goals.

The problem many investors face is that they try to go big too soon without first taking the time to build a solid foundation to support their investment goals. New property investors often overestimate their abilities while underestimating how quickly things can go wrong when investing in real estate.

How can you scale your real estate portfolio in the shortest window of time without unduly exposing yourself to risk? The team at Upkeep Media explains the practical steps property investors like you have used to achieve the property investment success you crave.

 

Steps to build and scale your real estate portfolio

With this list, we assume you are already familiar with the practices of evaluating the potential of a location before buying a property, assessing the profit potential or investment, and other basic information related to buying an investment property.

1. Start small

Woman writing on glass with red penThe best advice to start with is to not put all your money into a property without mastering the groundwork for managing a large portfolio of real estate investments. As a new property investor, you will make mistakes. Once you accept that mistakes can and will happen, it’s clear how allowing yourself to make manageable mistakes early on in your investment journey is the best approach. The impact of a costly mistake with an expensive investment can be detrimental. With small investments, you give yourself room to learn and bounce back easily.

2. Take care of things yourself

Fully immersing yourself in every aspect of managing the property is a great idea in order to gain perspective. Know what it takes to oversee contractors. Become intimately familiar with tenant screening, real estate marketing, and the rental property regulations in your area. Acquaint yourself with the significant numbers you need to look at when trying to determine the viability of a potential investment. The knowledge you’ll gain from this experience will prepare you well when the time comes to scale your investment, and you’ll no longer have to do everything by yourself.

3. Expand financing options

When working to scale your real estate investment portfolio, a lot depends on how much money you can access at any given time. The more flexible your financing options are, the better for you. Do not rely on conventional lenders as your sole source of investment financing, as that will severely limit your opportunities and progress. Include alternative funding sources like customized loan options from specialist lenders, your 401K, ROTH IRA, seller financing, HELOCS, a second mortgage, self-directed IRA, and more.

4. Seek mentorship

Two business women shaking hands and smilingThe value of this step cannot be overstated. Surrounding yourself with people who have real estate investing experience will help you reach your goals more efficiently. Mentors provide an opportunity to help you build the foundations you need to scale your investments. They can offer a perspective that can open your eyes to potential issues you might not have considered yet. They can provide access to tools, insights, and relationships you may not have gotten on your own. Having a network of formal and informal mentorships is an invaluable tool that every investor needs.

5. Build a team

As you grow and evolve from handling all aspects of managing your property by yourself to having others manage the properties for you, you will need the following people by your side;

  • An underwriter to assess the risk of every new investment.
  • Someone to manage lead generation.
  • Someone to team up and raise money for new acquisitions.
  • A property manager to manage those assets.
  • Someone to tie all these different functions together to make things work smoothly.

These are in addition to the professionals you already have.

6. Buy bigger properties

Never buy a property with fewer units than the number of apartments in properties you already own. If you own single-family homes, make the next property a duplex. If you own duplexes, buy a property with four units. The reason is the effort to manage a portfolio of 15 single-family homes (for instance) is greater than the effort to manage 2 apartment buildings with a total of forty units. However, the massive work you commit to those single-family units will not translate into more money for you. You will probably earn more money from the apartment buildings even if they require less effort to manage.

 

Not practicing humility when investing and making rash decisions can lead to mistakes that could have been avoided and that could derail your plans or, in some cases, wipe out your capital. Like any other investment, real estate investing has its risks. But you can avoid those issues if you also invest your time and energy into the appropriate knowledge and relationships.

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