Most individuals who already own multiple properties wrongly ignore key wealth creation concepts that could possibly unlock their ability to expand their portfolios of properties. Wealth creation is a cycle that cannot be completed overnight, so the first step is to have a clearly laid-out, long-term plan and goals that will drive your project. When building wealth via properties, here are 7 important factors to consider, especially if you are new to the business:
1. Specialization Area
It’s important to recognize the types of assets and the market you want to reach. If you are in the student leasing business, it makes sense to buy multi-tenant properties located next to colleges, whereas if you concentrate on renovating and reselling for a profit, it may be suitable for you to find distressed, stand-alone properties priced below their market value. However, as you continue to expand your portfolio, you may then consider diversification of assets.
2. Market Trends
Research influences your success in this field, and recognizing where to buy, when to purchase, how much to pay for a property and knowing the right time to sell a poorly performing asset can decide your success.
3. Start Small and Work Your Way Up
The biggest mistake that most beginners make is financially overstretching themselves by searching for assets outside their means. Start investing in more affordable properties and work your way up. If you are relying on a mortgage to purchase a property, make sure you have fully researched what you can afford and you fully understand all the mortgage jargon that comes with it.
4. Maximizing Assets
Using existing equity in the properties you currently own can help you leverage attractive opportunities. Also, lenders can provide you with a variety of solutions tailored to your needs, with a fair mix of rates, access to capital and flexibility around repayment options.
5. Cash Flow Management
The cash flow is the lifeblood of your property portfolio as in any other company. Not only is it essential to keep track of money coming in and out of your portfolio for strategic decision making, but borrowers may also need your cash flow statements to accept loans in the future. Monitoring your cash flow may also help you to determine assets in your portfolio which are over-and under-performing.
6 Using a Technological Advantage
Innovative digital tools can provide you with access to valuable property information simply by clicking a button. There are numerous real estate tools and apps for property owners that you can take advantage of to create wealth.
7. Using the Right Professionals
While it might not be necessary when beginning, engaging with a team of professionals should be considered as your portfolio expands. You need a list of qualified professionals, such as estate and leasing agents, tax practitioners, attorneys, architects, construction contractors, electricians, plumbers, and valuators, among others, depending on the type of portfolio you’re seeking. Although some of these experts’ services can be expensive, in the long run the investment will be worth it.
Finally, establishing a long-term relationship with a private banker who knows and understands your financial goals and priorities and can provide creative, carefully thought-out solutions to help you grow your property empire.