Looking to build a portfolio of real estate investment properties? The process of getting from zero to a healthy collection that generates income on an ongoing basis can be complex, but it is within reach if you follow the right steps.
Since all investors have different goals and metrics for performance, there is no one way to build a successful real estate portfolio. But if you follow best practices and consider factors that are important for your specific situation, you can put yourself in position to make a splash in the commercial real estate market and achieve sustainable success.
Steps to Start Building Your Portfolio
Investors who want to build a commercial real estate portfolio should follow proven steps during the process to have the best chances for success.
Evaluate the Market
Having a firm grasp of the commercial real estate market is a crucial first step for any investor. Commercial real estate agents and other mortgage professionals can help you gain insight into how the industry works, but you should also do your own research to gain a thorough understanding. Once you feel comfortable and zero in on specific properties, you need to do a comparative market analysis or CMA to find one that makes the most sense for your situation.
Determine Income Potential
Monthly rent payments are likely the most significant source of income for your commercial property, but they may not be the only one. Some properties may have income opportunities for game or event rooms, laundry facilities, parking fees, and more. That's not to say these kinds of multi-income properties necessarily make for stronger investments, but being able to diversify and add additional income streams can help position you for success as you build your portfolio.
List Monthly Expenses
Being financially responsible means calculating all of the expenses related to your purchase, as well as ongoing monthly expenses. You need to be able to cover your monthly loan amount, plus taxes, insurance, building maintenance and any repairs that come up and still have money left over.
Negotiate a Favorable Deal
Getting the best possible deal on your commercial real estate purchase can undoubtedly help create a positive cash flow each month.
Sale prices depend not just on property type and location, but also on the owner’s readiness to sell and financial objectives.
When it comes to the property type in question, certain properties may be safer bets than others for an initial investment. You can learn more by reading our post on investment property returns here.
Add More Properties
One property doesn't really make for a "portfolio," so once you’ve made your initial investment and you are earning income from it, you could consider adding more.
If you follow the right steps with the proper guidance and take action when the time is right, you’ll be able to build a commercial real estate portfolio can put you in a strong position for lasting success. Fill out our simple contact form if you’d like to find out if you’re eligible for a commercial real estate loan.