How to Build a Property Portfolio
When you talk about a risk hedge investment, property investment is among the first, you don't need to worry about market fluctuations. Plus, building a property portfolio is one of the best long-term investments.
But, as with every investment, knowing the right moves to make is what guarantees success. So, here you will learn how to build a property portfolio from start, the steps to take procedurally.
What is a Property Portfolio?
A property portfolio is simply a collection of real estate assets' investments. So typically, if you have two or more rental properties or homes for lease, you have a property portfolio. A property portfolio also includes your investment in real estate investment trusts (REITs) and real estate mutual funds, or a real estate exchange-traded fund (ETF).
As with every other investment, a property portfolio serves as a vehicle to drive your financial goals which can be funding your kids' education, saving for retirement, etc. It can also serve as your means to financial freedom.
How to Build a Property Portfolio: Step-By-Step Guide to Building Your Property Portfolio
With a good understanding of what a property portfolio is, let's dive into how to build a property portfolio.
#1. Have a Clear Goal
The first step on how to build a property portfolio is to have to be clear on what you want to achieve with your property portfolio. A goal is often a compass for your financial activities.
Your goal will determine the best investment strategy to adopt; whether you are buying to rent for profit or to live, to sell, or investing in a REIT.
#2. Conduct a Research
After you've figured out your investment objectives, the next step is to engage in extensive research. This is to identify the kind of property you need and the best locations for them. You can consult a property agent for professional advice and updated information about the property needs of different environments.
Portals like Zoopla and Rightmove are also helpful when it comes to information about market activities of real estate. Furthermore, you'll also need to understand rental yields and annual returns, especially if you are building for profit.
#3. Create a Plan For Your Property Investment.
Creating a plan will help you work with specific, time-bound goals that bring you closer to your goals. For instance, you can decide on tangible progress you should make towards building your property portfolio within a few years.
#4. Buy your First Investment Property
Now, this is the actual step on how to build a property portfolio, you have to start building, and it's important to build one at a time. And, this will be much easier since you've properly done your homework - research, you just need a real estate agent to perform the transaction.
#5. Increase Your Property Investment Over Time and Diversify
Now that you've purchased your first property, you can now start adding to your property portfolio gradually - one at a time.
Diversification is a key strategy in investment to reduce risk. You can diversify your asset class, your real estate market, and your investment strategy. You may need the professional services of a real estate portfolio manager to help you make the best decisions.
Bottom Line
If you understand how to build a property portfolio you may stand a better chance for tangible success.