Creating a Successful Real Estate Portfolio
With thorough research or even investment partnerships, the real estate game can see success beyond the buy and sell.
Real estate continues to be among the most valuable investment opportunities. There are various ways to gain returns from a solid portfolio. Yet, knowing how to build a strong property collection is not always a simple matter.
If you’re a real estate agent, clients will come to you for your expertise. This isn’t just limited to selling them a new family home or selling a commercial property to a small business. Agent or property owners alike, there may also be investors who want to collaborate with you in establishing a good selection of properties. Knowing how to create a successful real estate portfolio can see you build mutually beneficial, long-term relationships with investors. Not to mention that your knowledge here can help you target more valuable and relevant property prospects for your company.
Let’s look a little closer at what it takes to create a successful real estate portfolio.
Clarify the Priorities
What makes a successful real estate portfolio is very much dependent on the investor’s goals. These will influence the approach you take to selecting properties. As such, when acting as an agent for these clients or building your own portfolio, you must clarify the priorities.
These could include:
- Predictable Income. Some real estate investors will be interested in creating a relatively predictable income from their assets. As such, you are more likely to be focused on generating a solid rental property portfolio. Depending on the budgets involved, commercial real estate can be the most solid target. Still, residential rentals in neighborhoods peppered throughout Denver, Fort Collins, or Colorado Springs, for example, are favored by professionals and families and could also make for a reliable portfolio.
- Market Relevance. If your investors are looking to see quick sales returns on their portfolio, one of their priorities is likely to be market relevance. This doesn’t just mean focusing on a range of properties that are trending with buyers now. Rather, it’s also about being able to track the markets and forecast what neighborhoods and properties will be in demand in the near future. This could include sustainable houses to sell to increasingly environmentally conscious buyers. It may be creating a portfolio within properties outside cities to account for the rising popularity of remote work.
The market dictates what types of properties are being sought, the most active consumer demographics, and popular locations, among other aspects. Levels of supply and demand can also determine the validity of an investment.
Perform Thorough Research
A relevant and profitable folder of properties can’t arise from a cursory look at how local listings appear to match with investors’ priorities. In other words, identifying prospects that result in good returns must be based on thorough research.
Some areas of focus can include:
- Market Analysis. It’s almost impossible to identify potential areas for good investment returns without market knowledge. The market dictates what types of properties are being sought, the most active consumer demographics, and popular locations, among other aspects. Levels of supply and demand can also determine the validity of an investment. At the moment the poor supply of homes has caused prices to skyrocket, shooting the typical value of a Colorado home, as of 2022, at $545,794. Part of your role as an investor or real estate agent is to actively follow and analyze these changes to establish where profit could be made.
- Property Inspections. The most important aspects of a property can’t be determined by a simple review of its location and measurements. While a building may look good on the surface, there can be underlying issues that make it unsuitable for investment. The presence of “sick building syndrome” caused by unseen contaminants could affect the health of occupants or tenants over time. This applies as much to commercial properties as residential. Such issues can mean an investor either fails to retain tenants or has to make costly changes. Performing full property inspections can give you the knowledge to advise investors accordingly and avoid such problems.
- Community Development. Location is a vital consideration for any real estate portfolio. However, it’s important not to dismiss areas because they’re deemed as low value. There may be plans in place to create positive development in the area. This could be through improved infrastructure, enhanced safety protocols, or new amenities. For example, some local communities have pushed to create places where artists can flourish in places like Loveland in northern Colorado. Do your research about what changes are likely to occur in the near future. This allows you to identify properties that may be low cost now but see significant returns in the near future.
It’s still a great time to buy in the Colorado home real estate market. Even if that were to change tomorrow and a certain sector of the market were to see drastic economic failure, investors are protected via a diverse portfolio.
Be Mindful of Risks
Any investment is loaded with potential hazards. Being a successful investor is about understanding the risks and managing them accordingly. There are various factors that can determine your, or your client’s, ability to withstand aspects such as market volatility and economic uncertainty. However, there are some steps you can take to help create a more robust and protected real estate portfolio.
- Diverse Range. Having a diverse range of properties in a portfolio is important. This method helps investors weather market trends and changes more effectively. The diversity of properties in the portfolio can include various geographical locations, commercial and residential properties, and even rental and sale assets — from Airbnb’s in Aspen to college rentals in Greeley — it’s still a great time to buy in the Colorado home real estate market. Even if that were to change tomorrow and a certain sector of the market were to see drastic economic failure, investors are protected via a diverse portfolio.
- Professional Guidance. Working with experts is important when creating any solid portfolio. You are a key source of knowledge for your clients. However, it’s also important to build strong relationships with a range of other experts to mitigate risks. This should include reliable assessors to review and inspect properties prior to sale. For rentals, skilled property managers should be in place to screen for reliable tenants. They should also perform regular landlord inspections that ensure the continued good condition of the property.
A strong real estate portfolio can be a great investment for your real estate clients or your business. Building this involves gaining clarity on the investment priorities so you can select appropriate properties. It’s also vital to perform thorough research on the markets, properties, and community alike. Being mindful of risks throughout the process helps you to protect your assets.
There are never any guarantees in investment, but a portfolio based on informed choices can produce positive returns.
Noah Rue is a journalist and content writer, fascinated with the intersection between global health, personal wellness, and modern technology. When he isn’t searching out his next great writing opportunity, Noah likes to shut off his devices and head to the mountains to disconnect.