Buying your first property can take all the emotional and financial resources you have. Evaluating the nearly endless number of property and financing options, getting that down payment together, and actually sitting down and signing on the dotted line can feel like a monumental achievement.
And it absolutely is. A home is likely the largest investment you’ll ever make, and if you found and bought the right one, that’s something to be very proud of.
However, if you aspire to be a real estate investor, closing on that first property isn’t the end. It’s the beginning. Once that first investment starts yielding results, it’s time to look to reinvest those profits or rent checks into a second, third, fourth, or even fifteenth property. After all, the big investment firms do it, so why can’t you?
Well, you can. It’s not easy, but who said building a real estate empire would be? Let’s look at some of the best strategies for scaling up your real estate empire like the professionals do.
Devise a System
You’re not going to find great investment properties by driving around town and looking for “For Sale” signs in front yards. You need to take an analytical view of the market to find the best investments.
But before you can do that, you have to be very clear about what you want. What price range are you looking at for investment properties? What annual returns are you aiming for? What markets are you interested in? What’s your five-year plan? Your 10-year plan?
Savvy investors know exactly what the answers to these (and many other) questions are, because savvy investors have a very clear vision of what they want, and they have a well-defined plan about how to get there.
Assemble a Great Team
Scaling up your real estate portfolio isn’t something you can do alone.
Let’s say you’ve come up with a specific vision about what properties you want to acquire. If you’re looking to buy, say, multi-family homes in the Mid-Atlantic suburbs, how do you expect to get from that bird’s-eye view of things down to the specific properties on the ground?
The very first people you should add to your team are the real estate agents. An experienced agent knows every detail of their market, understands where the trends are heading, anticipates fluctuations, and is well-networked with the locals. Without a great agent, there is no real estate portfolio.
On the other hand, partnering with a top real estate agent with an investment focus can very quickly help convert your plan into profitable, on-the-ground action. With an agent’s inside knowledge of a market, your portfolio could scale up faster than you ever dreamed.
And that’s just the beginning. You’ll need a great real estate attorney to handle all the paperwork. If you’re renovating your investment properties, it pays to build a relationship with a dependable contractor.
And unless you plan on driving out to your building at three in the morning to unclog a tenant’s toilet, you’ll need a great property manager to collect rents and handle problems.
Like all great undertakings, building your real estate empire will have to be a group effort.
So you’ve done your research and you know exactly what kind of properties you want. You’ve found the best people to work with and built relationships with them. Now all that’s left is the most important part: the money.
If you’re one of the lucky few, you’re sitting on enough cash to go out and start writing checks for all the great properties your agents have found for you. But most investors will need financing.
There are many financing options for investors. Some of them are quite conventional, and others are quite creative.
The Conventional Loan
The most conventional is, well, the conventional loan. This is the bank mortgage we’re all familiar with; twenty percent down, standard interest rate, 30-year term.
The sticky part with the conventional loan is usually the 20% down payment. That’s a prohibitive amount of cash for most investors. Luckily, there are options that require little or no money down.
Hard money is private financing that looks at the potential value of the investment instead of the qualifications of the borrower. If the property you want to buy is a good bet in a hot market, you could very well get hard money to finance the purchase.
As you might imagine, though, hard money comes with some rather hard conditions. Since it’s a private loan, everything is negotiable, and many hard money financing plans call for repayment in as little as a year. Interest rates can also vary from market-rate to double or triple that.
This is a new and innovative option that can yield fantastic results, with a savvy marketing campaign. Crowdfunding works by letting a large number of investors put in various, often very small, amounts of money, and then sharing proportionally in the profits.
If you can get the word out to enough potential investors, this method can bring in huge amounts of cash. Think of it as a cross between a REIT and Twitter.
Scaling up your property portfolio into a real estate empire is a huge but attainable dream. Partnering with an experienced, knowledgeable real estate agent can help you achieve that dream faster and easier than you ever imagined.
Clever Partner Agents are all elite performers in their local market and come from top brokerages and brands. They bring a wealth of intimate, on-the-ground knowledge about their home markets to the table, and they provide a full-service agent experience for a flat fee. If you’re serious about building your real estate empire, contact us today!