Real estate allows investors to create their dream life at every level. However, access isn’t the only defining factor for an investor; scaling strategically in a way that manages risk is.
Investors looking to scale their portfolios can consider statistical market trends against real-life data. Political cycles, global affairs, and the job market influence economic confidence and investment opportunities. Explore these tips as you prepare for your next real estate deal to protect your assets and build the future you deserve.
1. Get Creative With Financing
The Federal Reserve may control borrowing rates, but you’re in charge of structuring your real estate deal. Step away from the world of traditional lending, and your real estate investment options expand.
Sellers of less-than-typical properties like mobile home parks may have a more difficult time with traditional lending. These properties offer great returns, but a bank may require more repairs than a seller is willing to do.
“Sellers can often sell more quickly and avoid costly repairs that are typically required by lenders,” says Lifestyle Investing expert Justin Donald regarding mobile home parks. “Additionally, since the seller is providing financing, the property may often command a higher sale price.”
In a seller financing arrangement, the seller serves as the buyer’s bank. The parties draft a deal and agree on terms, including the sale price, down payment, and payment schedule. Your agreement should be comprehensive, even though it’s being done outside of banking regulations.
This type of deal can be great for sellers of depressed properties and those who want to maximize profits. In a seller-financed deal, everyone saves on closing costs, making profitability a factor for both parties. Frequently, these deals are attractive for off-market sales, as depressed property owners may have given up on selling.
Work with a real estate attorney to draft the deal and protect your investment by understanding the risks. Get a professional inspection and include terms in your deal for anything relevant to the property type. Call out what happens if the current owner passes away before the repayment term is up, and vice versa.
Outline any shared responsibilities during the repayment term and any transferable agreements like outstanding repair costs, liens, and tenant agreements. Mobile home parks may offer lot rent, rental units, and rent-to-own options for tenants. Clarify the transfer of any outstanding agreements and where tenant payments are directed in your contract.
2. Diversify Your Assets
As you do in your retirement portfolio, diversifying your real estate portfolio is critical to navigating economic factors. As one of the best long-term-performing asset classes, real estate is reliable, but you can’t specialize in one category. Diversify your assets across single-family, multi-family, multi-use, and commercial, and repeat this in multiple cities and price points.
Examine trends in market value and assess area conditions to unearth new opportunities. Analyze human behavior, market growth, and geographic changes to strike new investments when they’re hot. Look to local economic deals to see what projects are prioritized and which fizzle to help direct your attention.
College enrollment is down from national data a decade ago, according to the National Center for Education Statistics. Students are considering alternative career paths, opting for nomadic lifestyles, and prioritizing happiness over stress.
This makes diversification even more important to meeting real estate demands. Individuals who travel for a living need flexible rental units that mesh with three and six-month assignments. Develop a suite of short-term rentals situated near hospital systems reliant on travel nurses and technicians and serve an excellent market.
Similarly, people who live in a recreational vehicle all or part of the year need a safe, reliable place to stay. Retrofit an old camping ground and offer short or long-term residential options. Layer your mobile home park to allow camper hookups, especially if you’re in an area with outdoor attractions.
Lastly, multi-use developments remain an attractive investment option and tenant solution. Build yours out with various unit sizes and hookups to inspire imagination and penned rental agreements with tenants.
3. Ink Joint Ventures
When you work on a team, you can accomplish more. And when you invest with a team, you can take bigger swings.
Partner with trusted, experienced, and reliable investors to tackle significant developments and unique opportunities. Vacation rentals can be expensive but offer owners a reliable income stream. Remove the financial barrier to entry by pooling your resources with others to gain access to bigger deals.
Ensure that everyone involved brings something valuable and unique to the table. One may have great deal-making skills, another may have access to capital, and you may be an expert at property management. Blend your skillsets with your property acquisition goals, and your joint venture will be fruitful.
Enter these agreements with clear expectations, guidelines, and rules to protect everyone’s interests. If you offer silent partnerships, clarify what that looks like in the deal and enforce those terms during the agreement. Outline the ownership strategy, including any buy-and-hold expectations and deal exits.
Your joint venture can expand your portfolio size and geographic reach, opening up new ideas and making strategic plays. A partner’s viewpoint in their area can infuse new ideas into your venture that your locale could’ve clouded. Plus, dividing the responsibilities among the group can streamline your processes and overall operations.
Network with other real estate investors, lenders, and economic groups to unearth new opportunities. Meet those involved in government dealmaking and extend an offer of your expertise to gain access to closed circles. When you do, you may learn of unlisted properties and investment risks you’d never know of without your network.
Scale Strategically To Grow Your Portfolio
Scaling your portfolio doesn’t just mean accumulating more properties; it’s doing so in a diversified, strategic, and risk-aware way. By structuring deals that gain access to new markets, financing creatively, and layering cash flow, you can protect your investments. Take bold steps, network with insiders, and seize risk-aware opportunities to scale your portfolio and position in the industry.
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