A step-by-step guide to build a portfolio of cash flowing deals in real estate

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There are many ways to develop a portfolio capable of handling cash flowing deals and real estate is considered among top 3 of them across the globe. Before we start digging deeper, remember that this isn’t a quick act. Instead, it takes years to build such a portfolio. To start with, when you’ve a goal to attain this type of portfolio, you simply can’t afford to buy any property. You can find a huge range of properties out there that are awful investments and may end up costing you more than what you make. Here’s a step-by-step guide to build a wealthy portfolio.

  • The first step: In this journey, buying your first property is the most crucial step you’ll ever take when developing your portfolio. So, take your time and act wisely. It may not bring you a fortune but will act as a learning curve for you. Ideally, you should look for a property with scope for improvement and in a centralized area.
  • Leverage the property: Now, when you own at least one property, leverage this equity to purchase more properties. Another benefit of this is that you don’t have to touch your own cash for buying property. The deposit will be paid from the equities of the properties you already own.
  • Develop a steady cash flow: Not developing a steady cash flow in each of your investments may limit your affordability. Develop a positive cash flow in every property you buy and that’ll help you grow your portfolio.
  • Increase the worth of your properties: According to many investors, either you can increase the worth of your properties or you can develop your cash flow. But, you can do both i.e. increase the rental income as well as the worth of your properties by performing some renovations. When you add value to your properties, your speed of buying properties increases automatically.
  • Scan the market: To make your portfolio wealthier, you need to have some processes to scan the market for profitable deals. Take help of online tools that let you identify profitable properties according to your investment criteria.
  • Manage your portfolio on your own: Since it’s your portfolio, you’ve to take optimum care of it. Keep accurate track of the incoming and outgoing financials of your property deals. If required, consult with real estate agents about how you can increase value or rental income.
  • Get rid of bad investments: You may have made a bad investment but that doesn’t mean you would be keeping that property until it gives you a profitable return. Instead, get rid of it and invest the money into a fresh one.calculator-calculation-insurance-finance-53621-large
  • Combine high growth with steady cash flow: In case you have steady cash flow without any capital growth, you won’t have any equity to invest. Similarly, if you’ve capital growth without steady cash flow, then at a certain point of time it might become impossible for you to afford service of your loans. Ideally, your portfolio should be a perfect merger of high growth and steady cash flow.  
  • Chalk out an investment strategy: You can find many investors who simply buy properties hoping to make profit. This might work for a couple of properties, but if you want to build a wealthier portfolio, chalk out an investment strategy that’ll help you develop a list of things you want in your properties. Then you can narrow down your market and find out the properties according to your preference and strategy.

Finally, think and act smart, invest wisely and keep patience. As said earlier, it is not an overnight journey. Give the process the time it needs and it’ll reward you for sure.

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