While your primary goal when it comes to your investment portfolio is to make a profit, how can it be achieved? The longer you wait to make your portfolio a lucrative one, the more money you are missing out on. The five steps outlined below help you build a profitable portfolio for long-term financial stability.
Know Before You Buy
Even if you’re familiar with a particular area, it is essential for you to do research before purchasing an investment property. You may be aware that the area is popular with homeowners, but what are the rental rates like? Determining a target area in which to look for properties before you team up with a real estate professional is a must.
Make a Financing Plan
Interest rates and mortgage fees have the potential to drain your profits when it comes to a real estate investment portfolio. Shopping for the best rate and comparing fees before you buy ensures that you get the best deal to keep your investment profitable in the long term. Pre-approval is an option that can give you a better idea of what you will be paying while giving you the opportunity to move fast when you find the perfect investment property.
Calculate Your Expenses
If you’re going to rent out a property in order to turn a profit while your investment grows in value, you’ll need to know how much the property will cost you over time. Maintenance fees are important for any property investor, but investors who become landlords have to also worry about some utility costs. Repairs may be necessary when tenants move out. An accurate calculation of these expenses can mean the difference between a profit and a loss.
Purchase Multiple Properties
While this may not be an option at first, you’ll want to aim to purchase multiple investment properties. Property investment is like any other type of investment. A diverse portfolio is the key to stable gains. If one asset is not performing as well as it should, the profitability of other investments will help maintain positive gains. Just be sure that each property purchase is well thought out instead of acting quickly to build a big portfolio.
Be Careful About Tenant Selection
You probably want your vacancies filled as quickly as possible to start earning money, but tenant selection is not a process that can be taken lightly. The wrong tenants can cause significant damage to your property or may not pay the rent in a timely manner. Screening tenants by reviewing employment history, credit reports and references from previous landlords is a must. Just be sure to get tenants’ permission before proceeding.
Building a profitable portfolio is possible when you follow the steps outlined above.