7 Ways to Build Your Property Portfolio
While homeownership is still common, the fact is that more people are renting homes nowadays rather than purchasing them. There are numerous reasons for this shift—from the increases in the cost of living to current wages, as well as young people being apprehensive when it comes to purchasing a home in the current economy. While this may be bad news for housing developers, it’s good news for those looking to increase their income or make a living by renting out their Tucson real estate properties. Getting the results you want as a landlord requires having a quality rental property portfolio—one filled with properties that will be in high demand with renters. This means using the right strategies both when acquiring properties and home improvement once purchased. So, what are some ways we suggest for you to build a quality property portfolio?
1. Consider Starting as a Partnership
The hardest part of building a property portfolio is getting started. This is a case where you have to spend money to make money, but you may not have the funds needed to get off the ground. In a case like this, one option is to start with a partnership. You and a trusted business partner would contribute equal amounts to the purchase of a property, then enjoy equal return on the investment. The goal here is to get the ball rolling together and later dissolve the partnership, with each of you forming your own business using the profits from the investments made together.
2. Target Foreclosures in In-Demand Areas
Foreclosures tend to sell for much less than other properties for sale in a given area. However, many of these properties are located in neighborhoods that renters may not be interested in. Rather than looking at foreclosed properties in general, focus on foreclosures in high-demand areas. These won’t be the cheapest properties available and chances are there will be some competition, but once you own these types of properties, you stand to see a significant return on investment in a short amount of time.
3. Look Into Multi-Family Units
Multi-family units refer to any residential property where there are multiple units that can be rented out. These properties may be as small as a duplex or as large as sprawling apartment complexes. The appeal of these multi-family units is that you pay one price to acquire them but get paid multiple times a month for renting them. Keep in mind that the amount you would charge monthly is determined by a percentage of the property’s market value plus various fees to make up the monthly rent, rather than the charge for renting the property divided by the number of units.
4. Don’t Ignore Commercial Properties
When people begin looking at acquiring rental properties, they tend to look at residential options only. This makes sense for most people, as residential properties are what they know best. The idea of renting out and managing a commercial property can be daunting. Commercial properties, however, are highly lucrative, allowing the owner to charge higher rent amounts for less effort on their part, as tenants will usually modify the space as they see fit. The owner doesn’t have to do much more than keep the rental safe and up to code, market the property, and collect rent each month from tenants. Having the help of a commercial property manager in Tucson can make the process much easier, as well.
5. Implement the C-B-A Strategy
To understand this strategy, you must first know what C, B, and A refer to. In this case, they refer to specific types of properties.
- Class C properties are those that are older and need significant work before they are ready to rent. They’re the cheapest to acquire in their given area.
- Class B properties are those that have the amenities renters want but are not top of the line and might look dated.
- Class A properties are those that are either new or already updated with the best and latest amenities that renters dream of having.
Many people building a rental property portfolio make the mistake of targeting Class A and Class B properties exclusively. They believe that the better the property, the more they will be able to charge and the better their profits will be. The truth is that the return on investment is often larger when you purchase a Class C property and upgrade it to a higher class. The key here is to stick with an in-demand area but go for the most affordable options that show potential.
6. Work With a Real Estate Broker
It may be tempting to cut out the middleman and select properties all on your own. If you aren’t well read in real estate investments, however, it’s better to have a professional guiding you. Real estate brokerage firms often have agents who specialize in the acquisition of rental properties. You can take advantage of their expert guidance to make the best possible choices in the given market you’re targeting.
7. Work With a Property Management Company
Property management companies take over the aspects that make owning rental properties difficult. A property manager in Tucson, for example, can market your properties, vet potential renters, select the best tenants, collect rent each month, monitor and maintain the property, and suggest improvements that will increase your profits. That’s a lot of work to do on your own time, and the more properties you own, the more work there will be to do. Eventually, you’ll run short on time for other tasks such as finding new properties to acquire and marketing them. Having help with rental property management also ensures that your properties stay up to standard, keeping tenants renting and happy. If you’re looking to build your rental property portfolio and could benefit from the help of a property manager in Arizona, be sure to contact us Bancroft & Associates with any questions. Our property management company will take the stress out of owning rental properties and assist you as you expand your portfolio. To learn more about our services, contact us at (520) 881-4884.