Investing in property can be a great way to make money, whether you’re interested in immediate cash flow or long-term gains. It’s also a favorite strategy because of its flexibility; you can customize your approach to suit your goals, optimizing it for a specific purpose or updating your tactics over time.
However, if you want to get the most out of your property investment strategy, you’ll need to follow some important tips.
Identify Your Goals
First, make sure you properly identify your goals. Too many people get into property investing with unclear direction; they know they want to make money, or feel like properties are a good place to put their investments. However, they don’t have a clear sense of what their personal priorities are.
For example, is this meant to serve as your retirement portfolio? If so, you’ll need to optimize for both long-term growth and (eventually) cash flow generation. Are you more interested in short-term gains? If so, you’ll need to choose a different selection of properties.
Write your goals down, and use them to inform the decisions you make throughout your strategic development.
Target Specific Demographics
You’ll likely see better results if you build your strategy around specific demographics. For example, you might seek to rent to college students, specifically, in a highly-populated college town. This will help you select a perfect property for these types of tenants, improve your marketing and advertising efforts to specifically target them, and eventually serve those demographics better. As for which demographics to target—that depends on your strategy.
Snowball Your Investments
Property investing lends itself to snowballing. Let’s say you have $10,000 for the down payment of a rental property. That rental property allows you to generate $2,500 of profit each year. In 4 years, you’ll accumulate $10,000, which you can use as the down payment on another similar property. At that point, you’ll make $5,000 of yearly profit, allowing you to buy another property in just 2 years. Follow this trend, and pretty soon, you’ll be buying a new property and multiplying your profitability multiple times a year (assuming you have the logistical capacity to keep those properties running smoothly).
Take advantage of this potential if you want to see the best results.
Get the Right Help
It’s pretty easy to manage a single-family property by yourself, but as you build your property portfolio, you’ll eventually need to get some help.
That help can come in many forms, including:
- Partners. Investing with a partner can be intimidating and may be difficult to manage (especially if you have different goals or personalities). However, this can instantly double the amount of money you have to invest. And if you’re proactive, you can split responsibilities evenly.
- Property management companies. You may also enlist the help of a property management company. These firms offer assistance with collecting rent, handling maintenance requests, and even filling vacancies and managing evictions. You’ll pay a portion of the revenue you generate, but it’s often worth the cost.
- Managers and other assistants. You could also hire a team of managers and other assistants of your own. This gives you much more flexibility with choosing the right people to help you achieve your property management goals.
Create Multiple Streams of Revenue
It’s highly effective to create multiple streams of revenue. That way, you can afford to lose a single source of revenue without much of an impact on your bottom line. The easiest way to do this is to invest in multifamily properties, where you can collect rent from multiple tenants at once. You can also generate money from properties in multiple ways, such as offering coin-operated washing machines and dryers, or vending machines.
Invest in Different Areas
If you’re only investing in properties in your city, you could be missing out on some serious growth potential. Consider investing in properties in a number of different areas; look at different neighborhoods around the city and at different cities around the country. You can hire a property management company to manage properties in remote areas.
Invest in Different Types of Property
Finally, consider investing in different types of property. Look for both single-family homes and multifamily homes. Look for both residential and commercial properties. If you diversify your property investment portfolio, you’ll generate more income and lower your risks.
Property investment doesn’t look the same to every investor. Some will prefer an aggressive approach, while others will prefer to be more passive. Some will be interested in a purely residential portfolio, while others want to dabble in commercial investments. Whatever the case, you should set specific goals for yourself and tailor your strategy to suit your needs over time.
Rachael is a content writer at Pearllemonproperties.com, who has written on a Ultimate Resume Guide, from colored diamonds to SEO software. In her spare time, she enjoys singing, sketching, cooking, and video games.