10 Best Tips to Build a Profitable Real Estate Investment Portfolio

As more and more of us look for better ways to secure our financial future than investing into stocks or relying on Social Security to provide for us in our old age, so interest in real estate investing is increasing.

After all, rarely do real estate investments lose money, whereas, all too often, other types of investments, be it pensions, stocks, or Bitcoin, fail to come to fruition. Is it any wonder, therefore, that an increasing number of people are interested in building a profitable property portfolio?

Here are ten top tips that expert real estate investors abide by when looking for rental properties. If you want to learn the tricks of the trade then read on…

1. Do Your Own Research

Find out how much rent you think you can comfortably get from a given property type in a given location. With that figure confirmed and in mind, apply the 1% rule. Never pay over 100 times more than the monthly rental figure for a property. For example, if you’re sure a property will rent for $700 a month, do not pay more than $70,000 for that property and, if properly managed, you will achieve a good rental yield.

2. Leverage OPM – Other People’s Money!

Never over commit your own personal wealth to an investment property. Instead, use loans, mortgages and private money to put down the smallest deposit possible. Preserve your own wealth at all costs.

3. Don’t Invest in Future Potential

Yes, you will want to gain equity over time, but don’t make that your primary profit play. If an area is considered to be “up and coming” or “in the path of progress,” never make that your primary reason for investment. That can be an added benefit or even icing on the cake, but build your plan around cash flow not equity growth. Stick to the fundamentals. Know that, if an area has already arrived and a particular property is already profitable, the future prospects for that property are already assured. It is a far better bet than speculating to hopefully, maybe, potentially, one day, become a home run!

4. Don’t Make it Personal

Don’t fall in love with your properties. An real estate investment is a pure profit-making enterprise, therefore, don’t get emotionally attached to any particular property and always remain as objective as possible.

5. Follow a Plan

Don’t go into real estate investing blind. Get educated. Find a mentor. Write a plan. Work and revise plan and stick to it. Without a plan, it is difficult to know where you’ve been and where you are going. A working strategic real estate investing plan will help get you to where you want to be faster and much more efficiently.

6. Invest for the Long Term

Seriously reconsider plans to renovate and sell on for profit. Sure, you can make a quick profit by flipping but what about the capital gains? And what do you have for the long term? Unless you’re a builder, an interior designer and you have friends who can do the rehabs cheap and get you materials at cost, you will often end up paying much more than you intended to pay and, in the long run, eat away at your profits. Yes, big money can be made from flipping but it is far easier to make money for the long term from a buy and hold rental property!

7. Keep Educated

Learn all you can from the wealth of brilliant real estate investing books, podcasts, websites, forums, masterminds, blogs, seminars, webinars and a host of free eBooks. Yes, there are always those whose wealth comes more from the seminars than actually working at real estate day-to-day and “in the trenches” – but you can also still derive much knowledge and wisdom from plenty of free resources.

8. Do Hands on Research

Get out on the streets, talk with Realtors and brokers, look at property prices, rental rates, the popularity of a given area, research local population growth, unemployment numbers and other relevant data that will help you determine whether you are in a strong, growing market. Only when you are certain about a location and a property type should you make a commitment to buy real estate.

9. Optimize Your Current Holdings

If you do your homework and are always focused on refining, being more efficient and optimizing your current property holdings you will boost equity and cash flow. Keep revising your facts and figures, reducing expenses and growing income. You should be confident in your own decisions and not be swayed by others who might say your plans will never work. You have to have dreams and ambitions and actively seek to convert those hopes and hard work to fruition. Keep your feet on the ground and don’t be swayed by the negativity and limitation of others.

10. Be Financially Pessimistic

Always underestimate your returns and overestimate your losses. That way, at best, you’ll be spot on with your earnings and, at best, you’ll be rewarded for practical and careful budgeting.