Income-producing real estate is one of the safest, most reliable and most secure forms of income. Think that you’re too old to invest in real estate? Or that you don’t have the time to take on yet another project? Think again! While building your real estate portfolio will not be quick and easy, it’s doable with the right team and a little know-how.
In fact, if you are thinking about utilizing income-producing real estate as a retirement vehicle, we have a few things to consider before you get started. It’s understandable that the idea of building a real estate portfolio might seem daunting at first, but if you follow a few simple steps, you can be on your way before you know it. The keys to success involve a level head, surrounding yourself with the right team and the willingness to commit to your future.
1. Be patient
You don’t need to be rich to get into real estate, but you do need to be patient. If you’re working with a smaller down payment, you’ll need to wait years, (sometimes several) for the equity in your property to grow. You’ve probably already guessed that real estate investing is a long-haul play and not a get-rich-quick scheme.
New investors should consider starting with a small one or two-unit building to get their feet wet. Buying and managing real estate isn’t for everyone, so it’s good to start small. After a year or two, consider adding a triplex or fourplex. Guess what? You now officially have a real estate portfolio!
With a couple of small properties under your belt, you can then think about a larger apartment building. While it may seem scary, the more doors you have will lessen your risk and increase your potential profit margin.
2. It’s never too late to start…but sooner is better
We’ve seen real estate investors as young as 26 and as old as 62.
Like every investment, there is no perfect time to start, but the sooner you start growing your portfolio, the more time you will have to see your investment grow.
Most often investors look to put down just enough money that will allow the property to carry itself. That works fine, but it may take a decade or more to start giving back a decent passive income. Therefore, the earlier you start, the sooner you can start enjoying passive income and hopefully, a secure retirement.
3. It’s not just Location, Location, Location
Location is the first thing most people think about when they dream of owning a home. However, this is not always the case when building your real estate portfolio. There are many more important factors to consider, like who is going to support your endeavor.
Bottom line: Make sure you have the right people around you. Shopping for a real estate investment shouldn’t just involve you and your family. You need the right real estate agent. A good agent will understand your wants and needs and will steer you in the right direction in terms of potential investment properties.
Don’t want to manage the day-to-day of your investment? Hire a property manager. While you have to pay them a fee, this person will handle the “nitty gritty” elements such as arranging repairs, interacting with tenants and fielding emergencies. A good property manager makes your life easier, reduces potential vacancies and keeps your rents at market — all three of which make for a successful real estate portfolio.
Referrals are the best way to meet the right people. Start with friends and family and then extend your search online. Don’t feel like you have to build your real estate portfolio alone…there are always people who can help.
4. Leverage, but Wisely
Building your real estate portfolio in your younger years can often lead to leveraging opportunities. If you buy right and you take a nice ride on the equity train you can quickly find yourself swimming in equity. You may be tempted to pull cash or perhaps even sell the property and grab a great return. Not so fast.
The best move is to reinvest in your already-thriving business. If you really want to build a real estate portfolio, purchasing another equity-rich property might be a perfect way to build the empire. Pro tip: Leveraging cash out of one property to buy another is the way the experienced investors often build their portfolio.
5. Be practical and smart
As you probably guessed, real estate investing involves a lot of steps and careful consideration. No matter how much you may anticipate, there will be surprises.
As we all know, roofs leak, tenants move and paint peels. Therefore, it’s best to plan for the unexpected. Make sure you have a well-padded emergency fund to deal with these kinds of expenses. It’s not a matter of “if” but “when”. And when it does happen, you’ll be glad that you have the cash to deal with it.
Still need a little more encouragement to get started? Destination Perpetuity will walk you through everything you need to know.