A smart real estate investor will constantly be thinking about long term and short term financial goals.
If you don’t have established investment goals and a clear strategy for achieving those goals, your growth will likely be stalled. You won’t know how to look for the right opportunities, and you might miss some important ways that you can really increase what your portfolio is capable of earning.
We have been helping investors manage their assets in the Santa Cruz rental market for years, and we have found that real wealth is created when you grow your investment portfolio. It doesn’t matter if you have one property or 10; consistently adding assets will give you an opportunity to earn more. Knowing how to get more money out of those assets will also help you grow your portfolio.
You have to do it correctly, and you have to understand your current position as well as the path you want to take moving forward.
Here are 5 quick tips that will help you grow your Santa Cruz real estate portfolio.
1. Treat Every Investment Property Like a Business
Real estate can get pretty emotional, even for experienced investors, and the first thing you have to remember is that your real estate portfolio is a business. You need to treat it that way.
Make business decisions, not emotional or impulsive decisions.
Smart investors grow by investing in the right properties. You cannot grow your portfolio by purchasing anything and everything. That’s not a good strategy for growth, and you’ll probably end up losing money. Instead, find an investment that will bring in some great short term cash and long term returns.
The right investment is a home that tenants will be interested in renting.
Look at every potential acquisition from the standpoint of your ideal renter. Make sure you’ll be able to charge the amount of rent you need to ensure the investment makes sense. Consider your expenses; will a lot of work be needed? Are there cosmetic improvements only, or will you spend months making repairs before you can even list it on the rental market?
It’s about quality, not quantity when you’re building your portfolio. Forget trying to keep up with other investors. This is a business, and you need to make smart, strategic business decisions that will lead to profitable growth and outcomes.
2. Santa Cruz Real Estate Acquisitions Lead to Growth
If you want to grow your portfolio, you need to be prepared to buy any time the right opportunity shows up. The Santa Cruz real estate market will impact how you structure and negotiate your deal, but don’t wait for the “right” market conditions – it’s always a good time to invest in Santa Cruz real estate.
When we’re asked about the “right” time to buy, we always encourage investors to buy whenever there’s something available that meets all of your investment criteria. When you find a property that meets your criteria and complements your existing portfolio, but it. Growth will occur when you acquire as many properties as you can.
3. Grow by Diversifying Your Investment Portfolio
You’ve heard this advice before: diversify.
It eliminates risk, and it also encourages growth.
When you diversify your real estate assets, you’re able to take advantage of strong market trends in specific industry sectors. Don’t be afraid to step outside of your comfort zone, whether we’re talking about property type or location.
If you have traditionally invested in single-family homes only, a great way to both diversify and grow your portfolio is by looking for opportunities to invest in multi-family properties or even an entire building. Perhaps some commercial real estate will help you grow. Look for a different geographical region, or diversify how you finance a property purchase.
4. Grow with a 1031 Exchange
We always recommend diversification, and if you’re wondering how to do that, one way to do it is with a 1031 exchange.
This is a great program that’s generally used by investors to defer the taxes they owe on a sale. It can also be used to grow your existing portfolio.
Under the 1031 exchange program, you can sell one property and then defer the capital gains taxes on it by investing the proceeds into another property (or several properties) that are similar. By “similar,” the IRS simply means that it has to be another income producing property.
This is a great way to unload an investment that may not be performing the way you want it to. Or, you can increase the size and strength of your portfolio by selling one single-family home, for example, and buying a couple of duplexes. There are a lot of options.
5. Leverage and Improve Your Existing Real Estate Assets
Encourage growth by leveraging the equity of your existing portfolio. When you can access equity in the properties you already own, you can use that money to acquire additional properties. It’s common to borrow against your equity and as long as you’re careful with the debt you’re willing to take on, you can use the rental homes you own now to increase the size of your rental portfolio.
Increasing the value of your rental properties is another excellent way to grow your portfolio. Growth does not always come with acquisition. You can earn more rent and increase your ROI when you make some cost-effective upgrades and updates to your rental homes.
In multi-family properties, consider an in-unit washer and dryer. This will allow you to collect more rent right away. In single-family homes, updated landscaping can provide better curb appeal and inspire interest from high quality tenants.
Hard surface flooring instead of carpet, new energy-efficient appliances, and even a fresh coat of paint can have an effect on your portfolio of rental real estate in Santa Cruz.
We’d love to take a look at your current investment portfolio and make some recommendations on how you might be able to grow. Contact us at Portola Property Management, and we’ll offer some tips that are customized specifically to you and your investment goals.