November 4, 2022
A property portfolio portrays the many investments of an individual or company. Just like a resume, these property portfolios help you analyze the kind of assets you own and make better financial decisions in the future. If you are looking to diversify your investments then the first step is to build your property investment portfolio. Your investment property portfolio is a testament to your risk tolerance and financial goals. This portfolio not just helps you plan your financial decisions but it also serves as a document you present before prospective financers to showcase your investment strategies, purchasing philosophies, testimonials, and so on.
Here are some ways to build your property portfolio.
A lot depends on your first investment and that’s why it has to be a well-thought-out decision. If your first property investment is able to generate sufficient profit then it makes things a lot easier to move on to the succeeding investments. But the reverse is also a possibility – if the initial investment costs you more than it brings you, recovering from this financial loss will in turn delay the process of expanding your property portfolio. So choose properties with greater return on investment (ROI) and conduct thorough market research before investing.
A property portfolio is usually known for representing your varied assets but it may be wise to stick to a single property type in the initial phase. Specializing in one property type for some time gives you an idea of what type of property you are interested in. Let’s say you are more into rental properties, then a sudden shift to REITs, MBSs, MICs, etc might be a premature dive into the world of diversified property investments. Sticking to one property type initially helps you to make better financial decisions in that area and opens up realms of opportunities for future investments.
When investing in property, it is always recommended to first venture into the known. For instance, going local gives you an exact idea of the market rates there, the prospects of future development or deterioration, etc. If you know that a prison is being developed in an area then you wouldn’t want to invest there, considering that you may not get too many buyers for that property later. Similarly, being aware of the upcoming developmental projects in an area such as a metro line or a highway, automatically tells you that a lucrative ROI awaits you. Hence, staying local is a good idea if you are looking to expand your property portfolio.
Once you have acquired one or two properties, consider diversifying your portfolio. Real estate is a fairly risk-free investment option but even then, there might be unprecedented ups and downs in the market. Not having all your eggs in the same basket comes in handy in such a scenario. Diversifying your portfolio to include raw land, REITs, fix-and-flip properties, commercial properties, rental properties, etc promises to mitigate risk and boost your portfolio.
An investment property portfolio must be representative of the various financial figures such as the purchase price, profits, maintenance expenses, resale price, etc of all your individual properties. Further, it must also reflect the financing options you used to acquire each of your properties, such as bank loans or hard money loans. Adding the financial aspect of all your investments helps convince prospective investors or buyers of your credibility.
With calculated risks, efficient financial planning, and deals that promise increased ROI, you can steadily work on expanding your investment property portfolio. Your property portfolio will go a long way in helping you get investors on board and create a successful investment journey for yourself!
How to Build Your Property Investment Portfolio