Here’s How to Build a Real Estate Portfolio!
A real estate investor is as profitable as a well curated real estate portfolio. To build a real estate portfolio, you as an investor need to understand what you want from your investment. A well built real estate portfolio is a source of financial freedom for anyone who is able to build one successfully.
A real estate portfolio is a collection of properties held and managed to meet a financial goal. A real estate portfolio can be held by either an individual or by an organisation. If you are looking to build a real estate portfolio that offers you a steady flow of income over a long period of time here are a few noteworthy points.
Understand Real Estate
You should understand the real estate climate of the region you want to build your portfolio in. You should understand the laws, regulations and rules that govern real estate to ensure that you are beyond reproach and can successfully build a profitable portfolio. Due diligence is one of the most important processes that any real estate investor should meticulously undertake. This would save you a lot of time from being tied up in litigation or from being defrauded of your finances.
Know Your Goals
A real estate portfolio serves a purpose and that purpose should be clearly defined. As this goal is drawn up; as an investor you need to know your level of risk. You should be financially stable enough to withstand or absorb losses or to support your portfolio as you build it. Define the time frame within which you seek to achieve this goal, which is usually financial. The time frame will inform the type of properties you invest in and also the type of capital you need to begin your portfolio. Properties that are in high demand have a higher turnover rate and properties that are in lower demand may take a longer time to give you the return you are looking for. Know your goals and purchase properties that can help you achieve your financial goals.
The goals of a real estate portfolio as well as other factors such as risk level and return on investment would determine the level of financing that would go into building a portfolio. For a longer term portfolio, excess income can be spent in purchasing a small property and building the portfolio off the income of that property. For larger, more immediate goals, loans as well as other investors can be brought in to finance the purchase of the properties needed to start up the portfolio. In all this, you should be sure of your personal risk levels, your personal finances, the credibility of your investors as well as the terms of loans taken from banks. These financing plans should not look at just the acquisition of the first properties but at the manner in which other properties will be acquired. Would you reinvest the returns from your first property to get a second property? Would you continue to build your portfolio from that income or external financing would be a major source of funding? These are some questions that need to be asked as you build your portfolio.
Assets Allocation & Management
This is the crux of a real estate portfolio. As an investor you need to understand the supply and demand of the landscape that you find yourself in. Different locations will require different types of assets and you need to find the assets that would be able to meet the return on investments. A diversification of assets in a portfolio spreads risk across different asset groups and reduces the overall risk on the portfolio. Management of properties in a portfolio is essential to the profitability of the portfolio. Infrequent and improper maintenance of assets reduces the overall profitability of your portfolio due to resources going into major maintenance projects on assets.
Be sure to have a firm grasp of the points shared above and begin this journey. Building a real estate portfolio is a sound investment for individuals who are looking for long term financial freedom. Your portfolio can be a good way to build generational wealth as well.
Equilibrium Partners has plans to construct new developments that are a good place to begin your real estate investment journey. Read more about our work on our website or see our work on Facebook, Instagram, Twitter or LinkedIn to stay abreast of any real estate investment that is offered by Equilibrium Partners.