Regardless of whether you are already in the property investment business world or you are just getting started, one of your goals is most probably to build a stable portfolio which will allow you to pursue this career full-time. This means that you would be able to support yourself as well as expand your property portfolio with those earnings.
What’s crucial is that you are comfortable with the investments that you make, so, for instance, if that means you will focus on residential real estate investments, then that is where you should be. So, here are some pieces of advice to guide you in the real estate world and help avoid common mistakes when building a property portfolio.
Decide between flipping and renting a property
Essentially, house flipping refers to the process of purchasing a house at a smaller price and selling it as quickly as possible for a larger sum. Sometimes you might perform small renovations or fix some issues before you sell and the profit lies in the difference in the prices. On the other hand, renting is a source of regular monthly income, provided that you have tenants, and the income itself depends on the neighborhood, the property’s state, etc.
If you are uncertain about what model would be the best for your property portfolio, you first need to take a hard look at your finances. You might determine that you don’t have enough resources for a renovation, which you might need to do if you opt for house flipping. Also, supplement your savings so you would have something to tap into if your rentals remain vacant for some time.
Consult with real estate investment experts
Creating a stable property portfolio demands making wise choices and mitigating the risks – in short, always having an eye on the real estate market’s state. Unfortunately, no matter how enthusiastic and devoted you are, it is not always possible to monitor everything and make the right call each time.
Luckily, consulting with professionals can help reduce investor risk and expand your network which will bring you better deals. So, as a potential investor, what you can expect from working with experts who offer real estate investment services is strategic and analytical advice, as well as market trends’ insights. With their help, you won’t be entering uncharted territory but instead, you would be prepared for your next investment. Such comprehensive services are especially useful in the domain of your rights and obligations, and taxation because they give you peace of mind and help with making the optimal choice for your property portfolio.
Screen potential tenants
If you opted for your property portfolio to boast a developed network of rentals, there is one detail that many landlords oversee – making sure that the people who would be occupying them are trustworthy. It is not enough to go and meet them in person before you rent the property – sometimes you listen to your gut feeling and do some actual background check.
Firstly, make a database of all applicants, so that you have everything in one place. Secondly, try to find the applicants on social media to find some information concerning their character, and you can look into their credit reports to see if they pay their bills regularly. In addition to that, don’t take anything for granted – check their employment, previous landlords, and whether there were some cases of eviction in the past. Your property can be destroyed and you can suffer financial losses if you don’t screen potential tenants.
Consider hiring a property manager
If the workload related to the rentals becomes overwhelming or if you realize that you don’t have the time or skills to manage the rentals, then hiring a property manager might be the perfect solution. Of course, you have to take that person’s salary into account but in general, there are many advantages to hiring a property manager.
The managers’ main responsibilities are collecting the rent and handling the lease agreement with tenants. However, they will also advertise and show your property to potential tenants and handle the complaints of current tenants. Also, in case some dispute arises, they are the ones that serve legal notices and deal with evictions. So, a reliable property manager can help with bringing some structure and stability to your business.
Narrowing down your scope, seeking help from experts and property managers, as well as taking precautions with your prospective tenants are practical pieces of advice some of which you might not have considered in the first place. But what’s important is that you take your time to assess the properties, your finances and all of the above mentioned to ensure you build a stable portfolio that will bring you profit.