Two properties are better than one. In real estate, that much is certain. Yet, gathering the necessary capital for purchasing all those properties is another story entirely. Increasing your real estate investment portfolio by a few dozen properties is an achievement only a select few can claim for themselves. The rest, they need to step up their game. Nevertheless, living off of only a single investment property is an impossible task and buying multiple properties seems the most logical approach. That way you gain more financial freedom to invest your money — and diversify — wherever and whenever you want.
Here are some five essential tips you need to know if you want to buy multiple investment properties in real estate and succeed.
Buy below Market Value
When buying multiple real estate properties, it’s not so much about negotiating prices as it is about research. Anyone can buy property at market value but it takes a specific kind of investor to find a property below market value — a real-estate-savvy investor to be exact. Scan the market for any low-priced investment properties, including foreclosed houses and properties that have overstayed their welcome on the market. Additionally, find people who are desperate to sell their real estate as soon as possible and get these properties off their hands dirt cheap (before the competition gets there first).
As you can see, it’s all about finding the right opportunity. That way you make bank when you buy the property, and not when you sell it.
Raise Value through Renovations
Sometimes, the reason behind a property’s low price is due to it being somehow damaged or run-down from years of neglect and misuse. In that case, you have to get your hands dirty and renovate the place. In essence, that’s the fastest way to increase a property’s overall value and gain more equity in the process.
Speaking of which, do regular evaluations of your property — especially after some extensive renovations — to know exactly where you stand. You don’t want to undercut your passive rental income if you don’t have to or sell a renovated property for less than the optimal price. Also, the higher the valuation, the more equity you have for future investments. This will cause a snowball effect as your assets increase, lending you more spending power with each new purchase.
Look into Other Markets
Don’t stick solely to your local market and the surrounding area — expand your reach. It’s highly unlikely that you’ll find ten houses up for sale just around the corner; real estate opportunities are most often hidden from plain sight. Hence, you should consider other markets as well; particularly if you want to dabble in multiple properties investment.
Now, if you lack the adequate knowledge or expertise, seek advice from a top real estate investment firm and get some thorough insight into the ins and outs of the market in question. That way you won’t have to bang your head against the wall — that will only devalue your property, as well as your head — to get results. Don’t limit yourself to one place and look for opportunities wherever they may be.
Keep up with Market Trends and Changes
Just like with any other business, there are bound to be some market changes every now and then; you need to constantly play catch up. The real estate market, in general, is affected by a plethora of macro-factors such as GDP, inflation, interest rates, and so on. On top of that, there are other smaller, micro-factors that may have huge implications for your investment.
For instance, you need to keep track of different zoning laws, property taxes, Airbnb laws, etc. for each individual location. That way you can make timely reactions and save your investment if there’s a sudden change. Read a few real estate news articles from time to time, follow a blog, and stay informed.
Know When to Sell
Multiple properties investments work on the same BRRRR — Buy, Rehab, Rent, Refinance, and Repeat — principles as house flipping; you have to know when’s the right time to sell. For instance, a property you bought just a few years ago is now underperforming — sell it and reinvest your money elsewhere. There’s no point in keeping it if it doesn’t bring you any profit.
Whatever you do, just don’t go on making emotional decisions. Rookie real estate investors often make the mistake of overpaying a property just because of the looks. Yet, looks can be deceiving, as the old adage goes, and you can soon find yourself in a situation where you’re actually losing money, fast.
The more you buy, the easier it becomes. So, get into the game early and start generating that sweet passive income for future investments.
About the author: Mike Johnston is a home improvement and business blogger from Sydney. He is a regular writer at SmoothDecoratorand contributor on several interior design, real estate and eco blogs. Mike’s goal is to create and share meaningful content that helps and inspires people.