Kevin Ortner goes over the need to analyze your current portfolio to determine if a property needs to be sold due to inefficient cash flow, among other ways to build a strong portfolio.
Kevin talks about the need to know how each of your properties are performing and how when you’re in the market for another property, you’re choosing the best fit for your portfolio.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now let’s meet today’s expert host.
Kevin: Hello, I’m Kevin Ortner with Renters Warehouse, and I’ll be your host on REI Classroom today. We’re gonna take about your secrets to building your rent estate portfolio. In the past, if you’ve seen some of the other episodes, we’ve talked about what rent estate is and really how to win. What are the secrets to building a larger rent estate portfolio?
It really starts with accessing your portfolio, if you’ve already started, or again, having a plan to make sure you’re on track to continue to build that over long term.
Many folks watching or many people we talk to already own some investment properties, or what we like to call rent estate. Then often times it starts by really analyzing those investments to find out if they’re really the best ones to have. Perhaps it’s time to sell one of those properties and buy a new one, and use what’s called a 1031 exchange to do that. And really look at that portfolio and understand what your cash flow is. What’s your sell analysis on it? How much money can you make if you’re going to sell that property? But ultimately also understand your cash-on-cash return, the cap rate analysis.
We’ve talked about those in the past on REI Classroom, and so we won’t dive deep into those calculations, but really understanding how your current portfolio is performing is a big part. So many people buy one or two or three homes or rental properties and just forget about it. But on a yearly basis at least, really understanding how that property is performing and understanding if you could move that money around or get a new property to increase your overall portfolio strength, is very important.
Start small. This is something that is very interesting and oftentimes scary for people that are just getting into owning investment real estate or rent estate, and that is where do I start? And the answer is just start somewhere. Start small, understand again your plan, where you want to go, but also understand that cheap doesn’t always equal profitable.
There’s a lot of great deals in the market today in almost everyone’s market across the country, but you need to understand what you’re getting into if you are going after a, what some of us might call a cheaper or less expensive property. Sometimes those can work out really, really well, but do your due diligence going in and make sure if you are starting small or buying cheap, that you understand what rehab’s going to have to go into it, or what your ongoing maintenance or repair costs are going to be.
Don’t just buy the first thing you find. Don’t fall in love with the property, but make sure you’re finding properties that are competitively priced, maybe priced below market value. But you can certainly still find, especially if you’re willing to go in and put a little sweat equity into building that property up to what it needs to be to be rented out. And take advantage of the inexpensive, but needed renovations on a property. Don’t overdo it.
Depending on what kind of property you buy or what neighborhood that property is in, is really going to dictate the amenities and types of finishes you need in the home. But don’t overdo it because you’re not going to get that money back when it comes to rent. Make it very nice, make it clean, make sure it’s up-kept and ready to go, but you certainly don’t need to be going with high-grade materials as you’re renovating your rent estate or your rental portfolio.
Be strategic about how you market your properties. Make sure that you’re getting the best rent. That doesn’t always mean the highest and it certainly doesn’t mean the lowest, but being competitively priced so you can rent it within that first month, but also maximize your long-term cash flow is important. If you have questions about how to price your property, make sure you talk to a local expert, whether it be a realtor or a local property manager, to help you in pricing that property.
Then also the important part to continue to build this is to be prepared for the unexpected. If you have some extra money set aside for the unexpected big major repairs, or you prepared for those things and you’re really treating it like a business, you’re not going to get discouraged when those things come up. And it’s going to allow you to continue year after year, adding more real estate to your rent estate portfolio. So treat it like a business, and understand it’s a long term plan.
This isn’t a get rich overnight scheme, this is something that takes dedication, that takes consistency, and that really takes a plan to develop into a winning rent estate portfolio. But at the end of the day, if you do these steps over 10, 15, 20 years, you’re going to find yourself with a fantastic amount of real estate that your tenants are paying down for you, that’s increasing your value, that rents are rising, and really sets you up for long-term success and potentially a great retirement with rent estate.
That’s all we’ve got today in REI Classroom. Look forward to seeing you again soon.
Mike: HomeVestors, the We Buy Ugly Houses folks is a franchise system of hundreds of real estate investors that have purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing system in existence, whether you’re a pro looking to take your business to the next level, or whether you have no experience at all but a burning passion to be successful in real estate investing, please visit FlipNerd.com/ugly to learn more.
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