The real estate market is one of the best industries an aspiring investor can venture into, as there are always numerous opportunities to monetize a real estate investment, even in subpar economic conditions. Real estate is stable and it’s tangible, and no matter how early you start your career, you’re never too young to become a successful investor. That said, even though this sector offers numerous lucrative opportunities, that’s not to say that success is guaranteed.
In fact, many aspiring investors will struggle not only with their first investment, but with the task of building a stable portfolio as well. With that in mind, here is what you need to do in order to build a stable investment property portfolio.
The more you know, the more you’ll gain
Behind every successful property investor lies meticulous and continuous research. Simply put, the more knowledge you’re able to accumulate about your market, customers, competitors, the more you’ll be able to capitalize on every opportunity at the right time, and invest in the most lucrative prospect that will yield long-term financial gain, or even a quick buck. This is why market research should be at the forefront of your strategy.
What’s more, researching your market allows you to predict industry trends and adjust your strategy well ahead of time, which can allow you to back off an investment just in time before an economic downfall, or invest in the right moment before property prices start to rise. Before you make any business decisions, be sure to talk to market experts and other experienced investors, and stay on top of the latest trends so that you minimize risks and find the most lucrative prospects quickly.
Balance resale and rental investments
Good investors stick to a single revenue model, but great investors combine different types of income to generate long-term capital, financial security, and to spread the risk evenly. Remember, everyone wants that quick financial influx, but that might not be the thing they truly need at that moment. On the other hand, some investors want financial stability so much that they will settle for a rental property when they should have sold the asset when the time was right.
Your job is to know when you should try to sell, and when you should spruce up your rental property to appeal to affluent long-term tenants. Take a look at the local market trends to check if people are buying homes or renting them, and try to appeal to the needs of your demographic while taking the economic potential of key demographic into consideration. For example, millennials might be able to get better mortgages to buy their homes, but Gen Z-ers who are just now entering their home-buying years are still looking to rent for the time being.
Think beyond your local market
One of the most important elements of a stable investment portfolio is geographic diversification, or in other words, your ability to find investment properties outside of your country’s borders and capitalize in those lucrative foreign markets. For example, now that Southeast Asia is booming with real estate opportunities, investors from the west are increasingly looking to diversify and expand into the Asian market.
There are many considerations to making a foreign real estate investment a successful one, though, which is why investors will often work with a local property investment company that can provide legal, logistical, and administrative guidance, and even help them find the properties that fit their investment style, goals, and portfolio. While investing in foreign real estate might seem like a challenge, keep in mind that you should always be on the lookout for lucrative prospects abroad.
Invest in residential and commercial properties
Just like you should have a good mix of local and foreign investments under your belt, you should also look to diversify into the residential and commercial sector. Now, this is not a rule. If you consistently come across residential properties that you’re able to flip and sell quickly, then stick with it – the same goes for commercial properties that you’re able to rent or sell like hot cakes.
That said, you should be on the lookout for lucrative opportunities in both sectors in order to spread your risk across different investments and capitalize on emerging trends. If you notice that a region is becoming a popular business hub, then don’t miss out on the opportunity to invest in a commercial space that the local business leaders will love.
Build a solid exit strategy
On a final note, a successful investor will always have a concrete exit strategy for each of their investments. There’s nothing quite as disappointing and potentially career-ending like not knowing when to sell a property, so you have to build a separate exit strategy every time you invest. The key here is to sell the property to the highest bidder at the right economic shift, so that you sell the property at its peak market value. Sometimes, you will have to wait for the local economy to stabilize after a downfall, and sometimes you will have to rent the property long-term until the right opportunity comes along.
Real estate always has something to offer to the aspiring investor, so be sure to implement these tips into your growth strategy to build a stable investment portfolio.
About the author: Mike Johnston is an avid freelance writer and blogger. He’s a regular contributor to numerous blogs and online magazines. Mike’s specialty are topics related to real estate, construction, property management, home improvement and living. Mike’s goal is to create interesting and compelling content and then share it with the online community.