The early phases of building a real estate investment portfolio in the Richmond area are often the most challenging. Developing systems that work is a series of trial-and-error experiences—and overcoming the unexpected is often standard.
However, expanding your holdings doesn’t have to be as difficult as it seems!
Once you have a few properties under your belt, there are some straightforward steps you can take to streamline and economize the growth of your real estate investment portfolio. Here are some tips on growing smarter—not harder.
1. Hold Onto Wholesalers in Richmond
A wholesaler can help you locate the kinds of deals that can serve as the foundation of your expansion. From the outside, what a wholesaler does may seem simple: they find deals. However, it’s more complicated than that—and only someone skilled in the art of finding a deal is going to be worth partnering with.
One of the primary skills a good wholesaler has is presenting you with deals that have adequate equity. If the profit margin is insufficient, a wholesaler worth their salt will eliminate the deal before even presenting it to you.
Evaluating equity in comparison to the costs of both acquisition and preparing the property for rent takes a specific skill set. If you know how to vet wholesalers in Richmond properly, and what to say when meeting with them, you'll find a valuable asset to the growth of your property investment portfolio.
Here’s how to start—and maintain—a good relationship with a quality wholesaler:
- Be transparent: If you’re ready to take it to the next level, but not prepared to go all-in, that’s fine. Let your wholesaler know your goals—no matter how lofty or modest they are. They can use this info to your advantage.
- Have regular meetings: There’s no reason to wait until a deal pops up to meet with your wholesaler! Regular meetings will keep you and your real estate portfolio at the forefront of their efforts.
- Pay your wholesaler fairly: Wholesalers understand the value of their services, so you don’t want to be too frugal when negotiating their compensation. At the same time, explain that you can only afford to pay so much and be open about why. This will foster an atmosphere of honesty and understanding that will pay off as you expand your real estate investment portfolio.
2. Use a Fix-Hold Strategy
Fixing and holding is often preferable for investors who want to build long-term wealth. While fixing and flipping has its perks, establishing a real estate portfolio with long-term investments has distinct advantages.
As the years go by, the value of your home has the chance to benefit from appreciation rates in Richmond. According to some estimates, property values in Richmond rise 6% or more each year. When you hold, you can take advantage of a strong, long-term real estate market.
The rental income from investment properties is a welcome addition to any real estate investment portfolio. However, there may be added benefits.
- You can acquire new properties by reinvesting some of the rental income to pay for down payments and closing costs.
- Rental rates tend to go up as time goes by, so the income production of a property you fix and hold can be substantial.
- Because the property began as a fixer-upper, the ratio of the income it generates to its initial cost can likely outpace that of many other assets in your portfolio—especially as time goes by.
3. Consider Buying New Properties
On the surface, deals on older or distressed properties often have exciting numbers. With price tags that sit far below those of others on the market, it can be tempting to pounce on a distressed property. However, this type of property also carries greater risk and is a project better suited to a seasoned investor.
Additionally, the time you have to spend rehabbing a distressed property may come with an opportunity cost that can tank your ROI. With new properties, this isn’t a problem: they’re good to go out of the box.
Naturally, not every new property is going to be a home run for your investment portfolio! Look for the following before you sign on the dotted line:
- A good location: Carefully do your comps. Often, the numbers will be in your favor, but it would be a mistake to guess. This is one area where working with a property management company in Richmond can be a huge asset! An expert will be able to offer you a cutting-edge market analysis for free as part of their property management services in Richmond.
- Multi-family properties: You can save significantly by purchasing a newly constructed multi-family property. Each unit has its own independent value, but they share the same foundation, utility hook-ups, roofing system, and other components that help cut down on the per-unit construction costs.
- Trouble-free rentals: Although new construction typically comes with a small fraction of the issues of more seasoned homes, you still have to examine each home before committing carefully. It would be a mistake to base your decision on the age of the property alone.
4. Keep Costs Under Control
Be sure you don’t overspend! Instead of focusing on what you think looks and feels “nice,” make a list of what potential renters value. If you're not sure, this is a great opportunity to work with a property management company in Richmond.
A local property manager fields a portfolio of diverse properties, which gives them fundamental insight into what tenants are looking for in a rental. This protects you from investing too heavily in amenities that seem appealing but are secretly an investing lemon.
Look for properties that have the essentials your property management partner mentions: this way, you’re less likely to end up paying extra for bells and whistles that may not improve your bottom line. The features a home buyer might be looking for in a property are completely different from the priorities of a tenant!
5. Hire a Richmond Property Manager
Finding the best deals takes a lot of time and effort. However, you don’t have to do it alone! Meet with a property management company to help make your expansion easier.
When you find the right property management partner, they do so much more than tip you off as to which properties in the area would be a great fit for your portfolio! A professional property management company in Richmond:
- Screens and places high-quality tenants in your new rental
- Fields the pet-screening process for your rental property
- Ensures the property is ready for move-in day
- Performs the necessary inspections that keep your property profitable
- Handles all tenant interactions—even midnight maintenance calls
- Works with a list of trusted contractors to save you big on maintenance
- Prepares the perfect property listing when it's time to find your next tenant.
This is by no means an exhaustive list of available property management services in Richmond, either!
When it's time to grow your portfolio, assembling a team of professionals that you can trust to help you grow is crucial to sustaining long-term wealth. Allocating certain tasks to the right professional ensures that your developing portfolio stays on the rails.
We know that when investors succeed, so do we! That's why Mission Realty Property Management put together our FREE guide to real estate investing! When you download your copy, you'll receive useful tips to develop your portfolio with a strong foundation.