The Benefits Of investing In A Real Estate Portfolio


There are many ways to run a real estate investing business. When starting out, it can be pretty intimidating trying to figure out which properties are best for you and what situations you should stay away from. Between quick rehab deals, wholesale opportunities, commercial buildings and single-family rentals, there are a lot of options available. If you do not have a firm idea of how you want your business to go, you can get swallowed up by the market and go from deal to deal without building a portfolio. If you can invest to your personality and realize that wealth doesn’t happen overnight, soon enough you start to see the real benefits of investing in real estate. Building a diversified real estate portfolio is a great way to accumulate wealth.

If you don’t know what you are really buying, it can be difficult to get passionate about a deal. The very first step in deciding what to buy should be getting as much information on the local area, the property and what your exit strategy will be. This is your investment and your business, so there is no reason to blindly take the advice of a fellow investor or something you may have heard at a local meeting. Many new investors fail to ask questions about the deal and regret it while they are in the middle of it. If you don’t feel comfortable with a deal, you have to wait until you do or do the due diligence to find out everything about the process. The investing business can be very profitable if done the right way, but you can also lose money if you don’t know what you are doing.

The more deals you do, the easier it will become. However, not everyone can flip houses and not everyone will be a good landlord. If you have to lean on your contractor or property manager, your bottom line will be much lower than you expect jeopardizing the profitability of the property. When developing a portfolio, you need to assess your personal strengths and weaknesses, and how they will impact your business. There is nothing wrong with passing on a deal that may make money, but may not be right for you.

While there is money to be made in real estate, not every deal will be a home run. As you build your business, you will realize that there will only be a small handful of big deals every year. The rest of the time you must be content to hit singles and make a small profit. Some deals will require a good amount of work to grind out a small profit, but that is the nature of the business. As long as you are making a profit and not taking a step back, you will continue to build your business and add to your portfolio. It takes years to get to the point that you have a competent team in place and your pipeline is filled for months. Even then there is no guarantee of profit on every deal. By taking on safe deals and continuing to make a profit, you will constantly keep your business moving forward.

Finally, building a portfolio means keeping some long term properties that you will hold for the foreseeable future. There is the temptation on many deals to get in and get out with as much profit as you can. This strategy can work on rehab deals, but for the long term strength of your portfolio you need to sprinkle in a few rental properties. The real estate market is very cyclical and will always have its share of ups and downs. If you are willing to ride the down markets out you will have your reward five or ten years down the road. This means buying in the right markets, even if you have to pay top dollar and collecting rent while the market turns. This takes patience and the ability to wait the market out, but the best way to make long term wealth in real estate is with long term buy and hold properties. Through tax breaks, monthly cash flow and appreciation gained over time the benefits are great if you are willing to wait. Ten to twenty years may seem like a lifetime away but it will be here before we know it.

Almost anyone can close an investment property deal and make some money. If you truly want to see the benefits of real estate and mitigate market risk, you need to build a portfolio. This means more than having a few properties that you own. Buying the right properties for you is more important than simply accumulating real estate. With properties you feel comfortable with and the right mix of long term holds you will develop a portfolio that makes a profit today, but also has long term potential. This starts with knowing what you want out of the business and having the patience to get there.