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How to Build a Real Estate Portfolio

As a real estate investor, it's important to understand the importance of building a solid real estate portfolio. Having a collection of investment assets helps you to achieve your financial goals while also serving as proof of your success.

If you're new to the real estate investing industry, here are some tips and tricks to building your portfolio from scratch.

Turn your home into your first investment property

Using your home as a rental property is a great way to get a taste of the world of real estate investing. You can rent out extra space in your home, such as the basement, or the entire property. Rental income is a great source of reliable cash flow, which is crucial for continuing to build your portfolio.

Before renting out your home:

  • Conduct market research so that you set rental rates that are competitive

  • Think about the costs of maintaining a rental property

  • Consult with a real estate agent to learn about rental rates and to review comps

Knowing how to turn your home into a money-making portfolio is key for beginning your career as a real estate investor.

Create a business plan

Real estate investing is all about making money and you should therefore treat it like a business. Building a real estate investment portfolio requires a lot of planning and forward thinking. While you’re making your 1st or 2nd purchase, you should be planning for your 3rd and 4th.

In creating a business plan, think about your investment goals to include a financial plan and an investment strategy. Figure out if you want to make passive income or if you’re more interested in being an active investor.

You’ll also want to determine how you will finance your purchases. Cold hard cash, hard money, and private money lenders are just a few options to use to acquire investment properties.

Embrace learning

To become a successful real estate investor, you need to be eager to learn anything and everything about the industry. Start by studying the various aspects of investing in real estate. Learn about buying a rental property, how to read a market, what drives property price growth, and housing market trends.

You also want to master the art of finding and analyzing investment opportunities. You want to ensure that you’re only buying properties that will yield the most profits and the best return on investment. You’ll want to learn all about:

  • Cash on return

  • Cap rate

  • Rate of return

The more you immerse yourself in the industry, the better you’ll get at the game.

Diversify your portfolio

When it comes to investing, you never want to put all of your eggs in one basket. The fact is that the real estate industry fluctuates on a daily basis. Having a single type of investment property could be disastrous, especially if the market drops.

By diversifying your portfolio, your high-performing investments will cover you in the event that a portion of the market drops.

You can diversify your portfolio in many ways. The easiest method is to invest in properties in different locations. Maybe you purchase your first investment property in Chattanooga but then expand your reach with a property in Marietta or Nashville.

Another way to diversify your portfolio is to invest in different asset classes. Sometimes the entire real estate market dips, but at other times, only a single asset class is impacted. You can add variety to your portfolio by investing in single family homes and retail real estate or a multifamily apartment.

Develop a network of real estate experts

As your portfolio expands, it’s crucial to surround yourself with real estate professionals that you can depend on for advice and support. Not only should you find fellow real estate investors, you’ll also want to connect with a CPA, a real estate agent, and most importantly, a general contractor to turn your flip dreams into reality.

Build your portfolio with confidence by partnering with Larossa Construction. We know the ins and outs of real estate investing and the importance of transforming a house while on a set budget and schedule.

If you're looking to build your real estate portfolio in Chattanooga or the surrounding area, contact Larossa Construction today! We look forward to helping you with your flip projects so that you can expand your portfolio.

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