As the housing market starts to cool a little, property investors are once again starting to look to grow their rental portfolio. However, increasing your real estate portfolio goes well beyond coming up with a down payment. Let’s look at seven ways to safely grow your rental portfolio.
1. Know Your Market & Plan
There is no “one-size-fits-all” approach to investing in real estate. Variables include access to capital, the economy/market, and intensity of competition. Asset type (single home, multiplex, multifamily building, etc), property location and access to equity all play a strong role in how quickly (and safely!) you can expand your rental portfolio. Many investors try to diversify their portfolio (different locations, different asset classes, etc.) to help mitigate risk.
Before signing on the dotted line, do your homework, as not all properties are a good investment. Look into the building age and condition as maintenance and repairs will impact your bottom line. Understand your investment goals and create a documented investment strategy. Whether you are going the route of “buy and hold” or “fix and flip,” an investment roadmap will keep you focused and moving forward.
2. Get a Management Team
As your real estate portfolio grows, so will the amount of time it takes to manage your rental properties. To succeed in real estate investing, you need to ensure that your investment portfolio is being cared for. Perhaps you managed your first few properties by yourself, but if you are serious about scaling your business, at some point you will need to create or hire a property management team.
Not all property investors want to be hands-on landlords. Often, they hand their rental portfolio over to a property management company that has the experience and expertise to oversee the day-to-day operations
3. Harness Technology
Technology is the link between any business and its customers. Anyone who says technology is not core to their business strategy is essentially saying that their customers are not the key to your business success. So, your property management firm is a technology business whether you want it to be or not.
Too many property management teams find themselves stuck in the weeds, held back by tedious administrative and manual tasks that could be – and should be – automated. Good property management software allows property management teams to pivot to more strategic, high-level work. It also allows property investors and managers to offer anywhere-anytime, digital self-service solutions to tenants, like paying rent online and requesting repairs. Property management software can also drive increased efficiencies while lowering costs --- even when scaling up operations with new portfolios.
4. Intense Customer-Focus
No business survives for very long without satisfying its customers. However, there is a big difference between being customer-focused, in the traditional sense of delivering service to the client, and placing customers at the very heart of everything you do. One is a lip-service acknowledgement and shows up on Mission statements as “our customers always come first,” the other is a philosophy that threads its way through an organization, engaging every employee and influencing every decision.
The property business is a people business. Yet, the consumer economy has changed. Property management orgs must adopt different strategies to compete and stay relevant to modern consumers. For example, the leasing process should be seamless and tenant-centric. When a prospect inquires about an available unit, can they opt for information to be sent in the manner that is most immediate and relevant to them? This may be text message rather than email or phone.
5. Keep a Sharp Eye on Cashflow
At the risk of stating the obvious, the ability to generate money and keep it flowing in is vital to your company’s fiscal health. Stay on top of your accounting. Look at any seasonal ups and downs and market trends. Know your rent roll. How many tenants are behind on payment? How can you tighten up the cash-to-bank time and reduce rent delinquencies? (An online payment platform definitely reduces collections.) What other areas of auxiliary income do you have? What can you do to reduce vacancies or turnover times?
6. Improve Your Margins
Operating margins are when you take your gross revenue and deduct operating costs. Operating margin is basically how much cash you have left over after running the day-to-day business to pay down debt, make improvements and pay income taxes. Understanding how this metric changes on a month-to-month basis can show you where you have revenue leakages. The goal is to be constantly trying to improve your margins while still maintaining and improving the value of your buildings. When you can create better margins, you can save money and use it to invest in other rental properties to scale your portfolio.
7. Set Goals
To safely grow your rental portfolio, you’ll need to set SMART goals for:
It goes to follow that when you increase revenues, your business expenses will probably go up as well. This could include things like adding new services to your properties or hiring more property managers or business development people. The markup you charge customers or tenants for your services may need to be adjusted to generate more profit. Look at your expenses from the last few years and look for areas to reduce or better control costs through streamlining operations and improving efficiencies.
Target a clear goal for the income for your property business. If you say that you want to increase your profit by 8% over the previous year, then you first need to figure out how much more you need to collect in income revenue to reach that goal.
Decide how much profit you want your business to generate over the year. Whether you use a specific dollar amount or a percentage increase over the previous year's sales, it needs to be defined. If it isn’t, you’ll never know whether you have reached your goal or not.
How Property Vista Helps Grow Your Rental Portfolio
At Property Vista, we give owners and property managers the tools to help make more informed decisions and improve their bottom line. Our property management solution has at-a-glance dashboards to help tabs on KPIs and costs. It includes an owner and tenant portal to promote effective communication between the property firm, its residents and the building owners. Check out our pricing and book a demo.