After two years of turmoil in the U.S. real estate market, investors are looking forward to what diversifying their existing real estate portfolio in 2023 may bring. While it is a sure way to generate high ROI and increase financial security over time, it requires deep insight into current market trends, a targeted approach, and enough patience. Also, it is crucial to settle on a goal, develop a plan to achieve it, and decide on a timezone to recognize investment opportunities and make them worthwhile.
Whether you want to be a hands-on investor or a completely hands-off one, here are five tips for growing your real estate portfolio in 2023.
1. Set Clear Real Estate Investment Goals
To grow your portfolio, first, you should establish clear goals for yourself. It means having a clear understanding of expectations. It starts with impeccable market research on current market trends, rental prices, days on the market, and an eye for selling and buying metrics.
Looking at community statistics, including economic growth, job market and demographics, is essential. Additionally, you should be clear about where you want to invest, what you want to achieve and what type of property you want to invest in. Once you analyze all these things, you can focus on growing your portfolio.
2. Look For Properties With A Positive Cash Flow
One of the promising ways to grow your real estate portfolio is to identify positive cash flow opportunities. Generating steady cash flow can open up access to funds that will enable you to buy more or help serve as a source of income that can qualify you for an additional loan.
Instead of your properties costing you money, they are paying for themselves and giving you a profit. The profit that you can put towards a new investment. After all, one investment may not offer complete financial freedom, but multiple properties certainly will.
3. Explore Cost-Reduction Efforts
Growing your real estate portfolio involves cost-reduction efforts. It is crucial to review your statements and analyze your expenses to explore if there are opportunities to reduce costs or negotiate better rates. For instance, you might be paying extra to a contractor who regularly maintains your property. However, upgrading a property to modern thermostat technology or energy-efficient fixtures could reduce monthly utility costs.
4. Diversify Your Property Portfolio
Diversifying your real estate investment instead of focusing on a single property can save you from the potential risks of losing extra money. It can help you explore different real estate markets and grow your portfolio. Avoid putting all your eggs in a single property basket, and consider exploring new communities where you can invest or diversify with different property types.
If you currently own a residential property, consider buying commercial, short-term, or vacation rentals. We recommend you invest in multiple locations so that even if one of your properties takes a loss in one way, the other can provide steady income and stability with your portfolio.
5. Consider Fixing And Flipping
‘Fix and flip’ is an effective strategy that can help real estate investors grow their portfolios. It means you buy an investment property that you can quickly renovate or fix and sell for profit to start over again.
The primary purpose is to turn a profit when you sell and leverage those gains to make more investments to fix, flip, or rent. However, there is a significant risk of losing your hard-earned money in renovating a property with far more condition problems.
To reduce the risk, you can leave at least a 30% margin between what you pay for the investment and repairs and what you expect the property’s after-repair value (ARV). This way, you can protect yourself if anything that ends up being more expensive than planned happens.
Apart from the tips mentioned above, you can consider other ways to grow your portfolio, such as leveraging home equity, investing in rental properties, using proven marketing strategies, avoiding costly legal mistakes, and hiring professionals. At New Bridge Management, we can assist you in marketing your investment property and provide you with different portfolio expansion tips.
Contact us at New Bridge Management for more insights on growing your real estate portfolio.
