Five Strategies to Help Scale Your Investment Portfolio

BY MARCO VARTANIAN, PRESIDENT, SULLIVAN PROPERTY MANAGEMENT

Scaling a real estate investment portfolio requires a mix of both skill and money. With each additional investment, the challenge of managing a growing real estate portfolio grows in parallel with increased capital commitments. A savvy property investor knows how to work through most limitations. In contrast, an unskilled owner risks squandering the significant economic benefit of a larger portfolio.

Below are five strategies that will help an apartment investor grow their portfolio and maximize their investment opportunity.

1. Develop a Network

Networking is an area that real estate investors know they should focus on but rarely do enough of. By networking with owner peers and industry participants, an investor can grow their knowledge base and unlock invaluable access to market trends and preferred vendors. This networking effort will result in the opportunity to acquire additional properties.

2. Identify Your Target Markets

Once a network is developed, an investor should identify 3–5 select areas for geographic focus. By becoming an expert of specific markets an investor can be armed with the knowledge and conviction to quickly proceed when an opportunity presents itself. Employment, median income, and population size

are valuable attributes in determining the strength of a market area.

3. Invest with Others

A growth-minded investor is always working and learning from others. While joint ventures can be complicated, if properly structured, a partnership allows investors to bring their own education, experience, and skills to an opportunity. By pooling time and financial resources, a partnership can significantly lessen the individual burdens associated with a sole venture.

4. Know Your Capital

While loans from family and friends can help an investor get started, to scale, investors will need to eventually identify and use other forms of financing. Below are a few ways investors fund their real estate investments:

Conventional Loans: The most common solution for building a portfolio of income-producing rental properties. Conventional lenders look at debt-to-income ratio, underwrite terms of 1–30 years, and over time, their financing helps unlock additional equity to reinvest in other properties. Private Lenders: While they typically charge higher rates and fees, private lenders are known to offer more flexible loan terms that are tailored to the borrower and the asset. Private lenders can also originate loans more quickly, with less administrative requirements than a traditional bank.

Refinancing: Post-stabilization of an investment, a mortgage refinancing can provide several benefits including equity cash-out and a reset of loan terms. Generally, a long-term “permanent” loan features the lowest available rates and loan proceeds which can free up investor equity for reinvestment.

5. Hire a Property Manager

Working with a professional property manager frees up time for an investor to focus on portfolio growth and building long-term wealth. Done well, a property manager acts as an outsourced operating partner who is closely aligned with an investor’s growth goals. Property managers also have access to service providers who can offer better terms, a higher degree of responsiveness and completion guarantees. Finally, a qualified manager can assist in property compliance, collections, unit turns, resident communication and accounting.