If you are looking to increase your wealth, learning how to build a real estate portfolio should be the backbone of your investment company. In this article we are going to talk about the best ways to build your portfolio so that you can start the right way the first time and not lose a bunch of money.
Here are 3 steps to follow when building a Real Estate portfolio:
- Secure your income
Most real estate investors who fail, fail for this reason. They jump into Real Estate headfirst with no plan, no education, and no money. People tend to want to get rich quick and don’t want to take any risk at the same time. Most investors who succeed for the long-term have a good income before they start. The reason this helps is because they have financial backing when the storms hit. Also, they have “skin in the game” and tend to make better decisions because they have more at stake than someone only using someone else’s money.
If you do not have a solid income right now, create one. The best thing you can do is secure your family’s financial future by starting a business with a proven business model. Not only will you have peace of mind that your family is OK, you will also have more skills to manage your real estate portfolio more effectively, and you will have the money to use for down payments, repairs, vacancies, etc. You can start a landscaping business, a consulting business, a Realtor business, a fix and flip business, you can do whatever you want! Just make sure it is proven and realistic for you.
- Secure your assets
Before you get too deep into Real Estate, it is advisable to setup at least one LLC and one S-corp or other tax-saving entity. When you are in Real Estate and have success, you will be a moving target for those who prey on wealthy people. Consult with a CPA and a lawyer to get your entity structure setup before you have all of your properties tied to you. You could lose everything you work so hard for if you do not get this step right.
- Build your team
Once you have the money to invest in Real Estate and you have a solid asset protection plan in place, you can start hunting for deals. If you already have a high income or anticipate that happening, there is a good chance that you also do not have much time. If that is the case, you will want to good at delegation. Some investors say that this is the secret to their success. Learn how to find good, professional, hard-working experts in each area of the Real Estate Industry. A good real estate broker usually has most of this team in place for you. They add value to their clients when they have a good property manager, a good lawyer, a good general contractor, a good accountant, etc. If you already have some good relationships with any of these industry experts, contact them and ask for some introductions.
It is very important to interview several candidates for each position. You may find one broker/lawyer/other pro telling you one thing and the other telling you something else. This will give you the opportunity to find the right answer and hire the one you feel best about. Getting this step right will lead to lots of deals and require less of your time.