5 Steps for Strategically Planning for a Successful Real Estate Portfolio

  • Author: Agrima Nigam
  • 5 min read
  • March 20, 2021
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Many investors entering into the arena of investing are often puzzled about terms like portfolio management. Real estate portfolio management is nothing but the practise of managing assets that will help you reach your long-term financial goals.  These real estate portfolios will act as a report card for all your investments and financial transactions which will help you make calculative decisions.  

Especially for investors cruising through the sea of real estate investments without any professional guidance, this can seem like a daunting task. Well, it’s not as complicated as the jargon sounds, managing one’s real estate portfolio is a necessary requirement for investors investing in real estate and can be done by simply following a few basic steps. Here are 5 strategies that you must keep in mind while planning a successful real estate portfolio.

Gain Clarity on Your Objective

At any given time, different investments perform differently, so investors must first determine their end goal before selecting properties. While a single investment does not cause a portfolio to lose value, the mix of investments, as well as risk factors, can have an effect on your bottom line.

However, the types of real estate investments you have in your portfolio will play a big role in achieving your target, as residential properties and multifamily properties are designed to generate passive income, while assets like wholesaling and rehabs are designed to generate short-term profits.

Regularly Assess your Portfolio

The numbers on your portfolio determine the strength of your real estate investments. Each of your investment assets should be broken down by different numbers, such as purchase price, transaction/holding cost, benefit, repair cost, and sale price, in your real estate investment portfolio. A clear picture of all your transactions will help you in allocating your finances to new assets.

Apart from keeping a track of your finances, regularly assessing your portfolio allows you to track the performance of all your assets and make decisions accordingly. For example, if there is an asset that has outperformed that month, you choose to sell it and realize your profit. On the other hand if there is an asset that has underperformed as compared to others in any particular month, then you can assess according to the market conditions and after consulting with your advisor, whether to hold onto it or sell it.

Set Aside a Budget

It is also important to set aside a budget for your spending money separate from money you set aside to invest. Analyzing and updating your budget monthly, will also help you get started on long term wealth building. Therefore, analyze your net monthly funds (cash on hand, monthly salary, savings and retirement funds etc.) then further examine your monthly spending, this should give you an idea about how much money you are able to set aside for investing purposes.

After being thorough with your monthly budget analysis, it is also important to leave some scope for the external costs and expenses in the form of property maintenance, insurance, property management fees and transaction costs for buying new assets, etc. Keeping an adequate amount of funds aside for unexpected contingencies will help you avoid last minute cash crunch.

Focus on Asset Allocation & Diversification

This involves deciding on the best asset allocation formula for your objectives. While it is a difficult challenge, real estate investors must choose a portfolio of assets that not only have the best chance of achieving their objectives, but also do so at the degree of risk they seek.

The types of real estate investments you include based on the asset selection process will determine how you achieve your targets.

  • Rental Properties:

If you are looking for a steady income source that appreciates over a long-term, then rental properties and other types of residential properties would be great. Investors make money by collecting rent from the tenants and there is also a chance to realize profits as the property eventually appreciates in value after some time.

  • Commercial Real Estate:

Commercial properties usually consist of office buildings, industrial space, retail and other commercial spaces such as a mall etc. As an owner, you can lease these office spaces/ commercial spaces to businesses that would pay you rent in order to use that space. This form of investment also guarantees a steady long-term income.

  • Undeveloped Land:

Moreover, for investors looking at long-term investment prospects, investing in undeveloped land is also an option. Investors who buy raw land can divide it for resale, rent it out to tenants, build new homes on it, or even hang on to it while it appreciates.

Seek Professional Guidance

Another thing to keep in mind while learning how to start a real estate portfolio is how it will be handled. When it comes to holding onto properties, owners must determine whether to employ a property management firm or become the landlord and run the property themselves. This is a question that lenders will not only want answers to, but will also want to know how it affects your bottom line. Whether or not you have a dedicated property manager, your real estate portfolio should provide information on how your properties are being cared for, as well as the extra costs associated with their management.

In addition to this, consulting professional real estate advisors will help you build a portfolio that is well curated to your objectives and needs. Real estate advisors can streamline your search for properties by recommending lucrative assets according to your finances and investment goals. They can further help you select investments to meet both your long-term and short-term financial needs. A thorough and careful selection of assets will define the overall portfolio.

Understanding the value of a real estate portfolio is essential for managing and growing long-term income, including your personal budget, as well as obtaining funding for future ventures. Finally, how to begin a real estate portfolio is decided by an investor’s ultimate end goal, as the assets gained would decide their route to achieving it. Now, that you have addressed the aspects regarding how to build and manage a real estate portfolio, you must consider growing your portfolio. It is therefore important to realize that a portfolio is not achieved overnight, it is built up strategically over-time.

Assetmonk is a one-of-a-kind real estate investment platform that assists you in identifying premium properties in Bangalore, Chennai, and Hyderabad that match your investment criteria. Our products are designed to meet your specific investment needs and help you build a successful portfolio. Our daily posts and blogs will keep you up to date on the latest real estate news, insights, and tips.

Frequently Asked Questions on Strategies for a Successful Real Estate Portfolio:

While building your real estate portfolio, keep the following steps in mind:

  • Have a clear investment goal and strategy in your mind
  • Plan your budget according to your financial goals
  • Assess the properties in the market and do your survey thoroughly 
  • Invest in certain properties after consulting from real estate advisors and monitor them regularly
  • Focus on diversifying your portfolio

There are many different allocations and percentages mentioned online. However, the exact percentage for you will solely depend on your own investment priorities and risk tolerance. Therefore, while it is easy to generalize, the percentage of real estate to be included is essentially various from person to person and so investors must seek professional advice to find results that cater to their needs specifically.

It is important for investors to realize that a real investment is not built overnight. It has to be strategically achieved over time. Here are some steps to help you gradually grow your portfolio:

  • Stay updated and informed about the current market trends to better judge the position of your assets
  • Hire real estate advisors to help you streamline your search for lucrative investment options. 
  • Seek help from property management firms that can keep you updated on how your properties are being taken care of.
  • Diversify your portfolio to mitigate risk

A real estate portfolio is a list of various investment properties that are owned and managed in order to meet a financial objective. It’s a strategic database of existing and former real estate investments, such as rental properties, commercial real estate assets and REITs (Real Estate Investment Trusts), with the goal of making money.

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