Building a real estate portfolio can take time, but the good news is that if you are committed to doing it, you can make it happen with a good investment, smart development, and a very simple business plan.
While there are certainly many different ways to start that real estate portfolio, here are just a few of the major ones when it comes to finding and building a portfolio that can provide you lasting income and a great stream of money down the road:
Start With One Property!
Sounds simple, right? Start with a single property, whether it’s a single family home, or a duplex, or even a small apartment building if you have the money and resources to maintain it. When you start with that one and begin renting, you can take rent money and use it to purchase more properties over time, doubling down on your real estate portfolio and making more and more money over time.
Make Sure You Can Maintain
Buying and renting real estate is only half the battle. As the landlord, you must be able to satisfactorily maintain the property with cleaning, maintenance, and things like plumbing, landscaping, and more. Budget that into your considerations and remember to maintain your first property before you start buying up more!
Understand Your Tax Implications
When it comes to write-offs, tax claims and more, every single state is different – so you need to be sure that you understand your tax implications of owning specific properties. In many cases, you can take various write-offs thanks to what you own or what you may do with the property on your year-end taxes. Free tax calculators are great tools to assist.
Get an LLC To Protect Yourself
Finally, it’s critical that you develop an LLC (limited liability corporation) or an s-corporation in order to protect yourself legally. That way, you can protect your own personal assets if something goes wrong, and a tenant sues you, since they will only be able to sue the company and not your own personal assets. Having an LLC will protect you from lawsuits and other issues, and it may actually also help you in pass-through taxation to take advantage of write-offs and tax help when working with your accountant at the end of the year!
All in all, building a real estate portfolio is, for many, one of the best things they’ve ever done, and it is something that can be a wonderful experience for people looking for residual income and more. Take the time to develop it right, and you will notice that the benefits far outweigh various issues, and can be a boon to your bank account when you develop slowly, properly, and consistently. Good luck with your portfolio, and enjoy the process of finding a great home or duplex to purchase for renting purposes!
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My friend has looked into an LLC and as far as rentals go you essentially need to first pay off a property before putting it into an LLC. The bank has no incentive to allow you to move the mortgage into an LLC for the same reasons you DO have an incentive to move it into one. Once you have that first property put in one, though,the bank will likely give you a loan since they can go after the first property as well.
DC @ Young Adult Money recently posted…9 Things to Consider Before Renting a Basement or Bedroom
DC,
Good point there! If you are using financing, it isn’t always easy to move a loan from your own name to an LLC, and most lenders won’t allow it for conventional financing.
Another way to protect yourself is to get umbrella insurance. Policies usually start at $1 million and are quite affordable. They ride on top of your regular insurance, and are a lot easier to setup than LLCs.
FI Fighter recently posted…Real Estate Investing: Ways to Mitigate Risk in a Rising Market
I keep thinking I want to own real estate, but then I realize I don’t want to deal with tenants and don’t want to deal with a property manager either. So in the end I just invest in REITs instead. Not quite as good as actually owning a property yourself, but I understand how they work a little better and they are more hands off for me.
Brian,
I am doing the same thing – taking the easy way out. Returns are not anywhere near as good, but it is a lot less hassle!
MoneyAhoy recently posted…Money Saving Idea – Pirating
once we are done paying off student loans I would like to seriously look into owning a rental property. Our city seems to be growing and property values are doing really well. I think a property for a young family with 3 bedrooms and close to schools would be easy to rent out and make income from.
Liz recently posted…Taxes are a Strategy Game
I invest in REITs. Handling the day to day management of real estate takes a lot of patience and availability 24/7.
Barbara Friedberg recently posted…6 Tax Tips For High Income Investors
Thank you for the nice tips, I am planning to have a real estate company. Yes, I will start first one unit or one apartment. I am firm believer in real estate investment rather than a paper portfolio.
My Wealth Desire recently posted…Business Success Tips and Inspirational Words from Carlos Slim Helu
I have never really considered building up a real estate investment portfolio, and because our market here in Canada is in a really weird place and it’s hard to tell what it’s going to do in the long term. But many places, especially in the US, have a really strong market for things like this. Thanks for the information!
Daisy recently posted…The Hidden Costs of Flying Out of US Airports
Awesome post Pauline! Good job! Some people in real estate never consider making a portfolio and they end up asking why they are not making enough money. One should remember that there are thousands of real estate people out there and before you join the crowd you should have the idea how to stand out.
A really great idea that of starting up a LLC, wouldn’t have thought about this in a million years! Good tips, hopefully I’ll be able to get the first property some day and from that moment on – move up.
C. the Romanian recently posted…Renting Is Cheaper than Owning a House
We are eight years into owning rental properties and I am so glad we bought when we did. They’ll be paid off in about two years and then we’ll have over 2K in passive income per month. Yes, its a hassle, but it’s totally worth it IMO. We don’t have ours in an LLC. We have a large umbrella policy.
Holly@ClubThrifty recently posted…An Open Letter to Comcast
I never thought about the LLC part but that makes perfect sense. I’m as far away from being a landlord as can be at this point in my life but it is something I definitely want to do in the near future.
Tara @ Streets Ahead Living recently posted…You aren’t entitled to anything
Good tips…if only I didn’t live in such a high cost area…I’d really consider rental property. I’ve recently been thinking about buying in a different area, but for a first property, I don’t know if it’s a good idea to have it so far away.
Andrew@LivingRichCheaply recently posted…Image is Everything. Isn’t it?
That is the topic of my real estate post next week, when does it make sense to buy a rental and rent for yourself instead.
Buying and then renting out houses is an awesome strategy. That is my backup plan on how to retire a millionaire. The problem i have with it is the bulk money from the down payment of the house or property. Then the time to research the location. Most of the time the best location are the expensive ones.
Jeff @Project Ikonz recently posted…This million dollar blog was nominated for a Liebster
Thank you for sharing. It’s very useful. Hope to hear more from you.
Great post! I’d like to hear more from you. Thank you for sharing.