You probably already know that over 90% of millionaires invest in real estate. One of the best ways to manage these investments is by building a portfolio. Setting your goals and creating the proper financial plan are the first steps in building your financial freedom.
Want to learn how to build your real estate portfolio? Keep reading, and we will tell you how.
What Is a Real Estate Portfolio?
You have decided to invest in Real Estate and have come across the term real estate portfolio. You might be wondering what that means and how you can start building a portfolio.
So what exactly is a real estate portfolio? It is a collection of your current and past real estate investments and assets.
It serves several purposes; first, the portfolio acts as a resume documenting the success of your investments. Second, it provides you with the correct data to make your next investment.
Without this essential data, you find yourself taking unnecessary risks and losses.
Building a Portfolio
Getting started on a portfolio can be an overwhelming process. As is usual, new comes with risks, but also excitement. The same goes for investing in real estate.
Let's review the proper steps to take for wealth building and becoming financially free.
Goals
The first step to creating a portfolio is to determine your goals. For example, you could be looking to generate extra income to pay for your new boat, creating a rainy day fund, or you might want to go all-in and become completely financially free.
Financial Planning
Once you have your goal in mind, you can start making your financial plan. Depending on your goal, you might want to start small or dive in deep right away. Either way, you will need to know your numbers.
Keep in mind the following costs when you are planning your first investment:
- Purchase price
- Repair costs
- Monthly operating costs (such as a mortgage, loan payments, utilities)
- Profit
- Sale price
You will also have to determine the best rental price for your tenants, or if you are buying and flipping, the final sales price to ensure your profit margin.
Variation in Assets
Whether you are investing in multiple properties all at once or are looking to take a slower route and build your portfolio slowly, there must be diversity in your assets to decrease the risks of your investments.
Having a variation in different assets can be as simple as buying your next investment in another state or buying a duplex instead of a house.
What a Successful Real Estate Portfolio Looks Like
As mentioned above, diversity is vital in your portfolio. A variety in assets reduces the risk of loss if the economy crashes.
However, diversity is not the only mark of a good portfolio. You need to look at each investment separately and work out how your assets are performing.
A few things to take into consideration are appreciation and cash flow. Once you understand your investments, you can make a financially sound decision on whether you need to raise the rent, sell your property, or invest in renovations.
Are You Ready to Take the Next Step?
Now that you know the basics of building a portfolio, you may look into property management for your investments.
Book an appointment today to get your free rental analysis.
