4 Tips On Scaling Your Passive Real Estate Investment Portfolio

I love hearing people get excited about a career in real estate, either as an investor or an agent. Today, I’m going to discuss your “passive real estate investment portfolio,” which happens to fall into the “real estate investor” category. This post is geared more towards the beginner real estate investor who is looking to grow their real estate portfolio safely. To be successful in real estate, you need to understand “systems” (or be willing to learn) and then properly implement a system or multiple systems. Today, I would like to share 4 tips on scaling your passive real estate investment portfolio safely and effectively.

Noun: Scaling (skey-ling) The act of arranging in a graduated series. (Acquiring more properties & growing your portfolio)

Market Analysis – Research Your Real Estate Market

I tend to buy investment properties (rental properties) in areas that I know well. With that being said, I still perform a comprehensive market research analysis on every property that I intend to purchase. Smart real estate investing provides an opportunity to make a lot of money. However, making just a few uneducated decisions in real estate could put you into a bad situation and cause you to lose a bunch of money.

Make sure you get the answer to every one of these questions. Then, plug the answers into your system and determine whether the property is a “sound investment.”

  • What’s the average sale price of properties similar to my interest?
  • How many days on average are similar properties on the market before selling?
  • What are similar properties in the area renting for?
  • What upgrades or fixes has the current owner made since purchasing the property?
  • Is the current owner self managing or paying a property management company?
  • What are the current “Net Operating Expenses?”
  • Calculate ROI and workup a cash flow analysis
  • Find out why the current seller is interested in selling the property?

Plan of Action – Planning To Buy An Investment Property

The first part to your “plan of action” is to find affordable financing that makes sense. Financing has always been the number one challenge that new real estate investors face. More than likely, a beginning real estate investor has never asked a friend, family member or hard money lender for the amount of money it takes to purchase an investment property. If you can find a generous business partner with deep pockets who is willing to lend you cash money at a reasonable rate, you’ve just conquered one of the hardest and most important steps all new real estate investors face. If you are not lucky enough to have a wealthy friend that is willing to partner up, you will need to get comfortable raising money from friends and family members.

The second part of your “plan of action” is to map out a reasonable repayment plan. You’ll want to make sure that your newly acquired rental property can generate enough monthly income that will enable you to re-pay your loan plus interest and to cover your net operating expenses. Keep in mind, one rental property is not going to make you rich and rental properties are long term investments.

When I purchased my very first rental property, I netted a measly $300.00 per month after re-paying my loan plus interest and covering my monthly net operating expenses. But, I had a plan and a long term goal of owning 15 rental properties that all averaged a net profit of $300.00 per month, which would generate $4,500 of passive monthly income for myself and my family.

“If you fail to plan, you are planning to fail!” ~ Benjamin Franklin

 

Real Estate Investment Programs (Systems)

As a new real estate investor, you are going to want to research a few well known successful real estate investment systems. The biggest mistake any new investor can make is to try to re-invent the wheel. When I began my career as a “real estate investor,” I researched three well known successful real estate investment programs and chose the one that I felt would work best for me. I followed that system to a tee and I DID NOT compromise the integrity of the program by adding any of my own ideas.

NOTE: An important piece of advice to any/all new real estate investors. Any proven successful real estate program (system) is just that, “Proven Successful.” You must fully trust in the system you decide to follow and dedicate yourself to following that system to a tee. One sure way to fail as a new real estate investor is to think that you know more than the system you’ve decided to follow.

Maintaining A Steady & Comfortable Growth Rate

“Scaling” is simply the act of procuring more real estate property and growing your real estate investment portfolio. I’ve seen many cases where beginner investors rush into buying multiple properties right out of the gate without testing their system. In the investor world, this is known as “Scaling to too early.” If you are serious about expanding your real estate investment portfolio and becoming a successful investor in your area, you should start by purchasing one single property while dialing in your system. As you perfect your system, you can then begin buying more properties and expanding your portfolio.

BONUS:

Our Real Estate Investing Program

I wanted this post to be solely directed at helping beginning real estate investors and NOT a plug for our personal real estate programs. With that being said, it’s hard to talk about following a specific real estate system or a proven, successful, real estate program without mentioning the specific program(s) that we follow each and every time we buy an investment property, wholesale real estate or flip a house. So, if you’re interested in learning more about our “Wholesale Real Estate Program” or our “How To Start Flipping Houses Program,” please find our contact information below.

Ohio Real Estate Guys

The Ohio Real Estate Guys are a team of real estate investors in Dayton, Ohio that wholesale real estate property and teach investors how to start flipping houses and successfully grow their real estate investment portfolio.

28 E. Rahn Rd. #213
Kettering, OH 45429
Phone: 937-490-9743
Email: info@ohiorealestateguys.com

Real Estate Investing: Multi Family vs Luxury Real Estate

DAYTON OHIO – Real estate investors remain bullish on the market for multi-family properties (apartment dwellings) in Dayton & Cincinnati Ohio. This coming year (2015), I foresee rent increases stabilizing and the best opportunities for real estate investors could be in older buildings, not new luxury properties.

If you watch the market closely, you’ll see that JPMorgan Chase and Prudential Mortgage Capital both have a positive outlook for multifamily properties and commercial real estate for the coming year. I’ve spoken with some of Dayton and Cincinnati Ohio’s top real estate investors and they have all mentioned that they see no end for the demand of investors to develop and buy multifamily housing in Dayton / Cincinnati Ohio.

The strong competition for the limited amount of duplexes, triplexes, and multifamily properties for sale and the limited amount of vacant land has driven up prices and demand for apartment buildings in Dayton / Cincinnati Ohio.

If you are thinking about investing in multi-family property in the Dayton / Cincinnati Ohio area, here are a few things to consider before buying an investment property.

Location, Location, Location of The Property

Before investing in a multifamily property, you’ll want to become familiar with the location of the property. You will need to understand the local real estate market, school district, crime rates, and if the area your investment property is located in is desirable to potential renters (tenants).

The Number of Units in A Potential Rental Property

You’ll want to educate yourself on the number of units per building and how many bedrooms and bathrooms are in each unit. In many cases, you’ll find a building that has four units, with three units having 2 bedrooms/1 bath and the fourth unit having 3 bedrooms/2 baths.

How Much Rental Income Each Unit Brings In

You’ll need to know how much rent each unit will bring in to calculate your return on investment (ROI). Because all units are not going to be the same size or have the same number of bedrooms, bathrooms, etc, you may be able to charge different rent amounts for the different units.

Return On Investment (ROI)

If the multifamily investment property you are considering has met all other criteria, you now need to calculate return on investment. Return on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets. So if your net profit is $100,000 and your total assets are $300,000, your ROI would be .33 or 33 percent.

Question The Seller About Their Rental Property

You’ll want to ask the current owner (seller) why he/she has decided to sell the investment property. Are there problems with the buildings? Not enough cash flow being generated? Are they just tired of being a landlord?