Creating a portfolio of investment properties is an excellent way to build generational wealth through passive income alone. But it’s essential to understand the ins and outs of this process to maximize your ROI. With the help of STR Verifi, a short-term rental income software that instantly generates a report with all the key metrics you need to guarantee ROI and secure financing, this is easier than ever.
At mbanc, we have helped countless people create a real estate portfolio and achieve their American Dream. Learn how to build a portfolio in our blog:
How to Build a Portfolio of Investment Properties
Building a rental property portfolio is an excellent way to build generational wealth. From starting small to market research to financing, here is how to build a portfolio.
When you start building a portfolio of investment properties, remember to start small. You will have a lot to learn, like how to maximize a property’s value, choose a property manager, assemble the right team, and create a business plan.
Network, learn from your successes and failures, and study your property to understand what works and doesn’t work to optimize your decision-making and future investments.
“Avoid getting too ambitious while you’re learning the ropes. Building a portfolio does not happen overnight, and getting too ambitious too early will do more harm than good. Starting small is key to bigger profits and sustainable, long-term success,” – Desh Weragoda, mbanc CTO.
Mbanc Hack: Remember to always keep your long-term goals in mind before making any decisions. We recommend low-risk options for first-time investors.
The next step in creating a rental property portfolio is considering growth. Growth hinges on the market you choose to invest in.
We typically advise investing in markets with exponential growth as opposed to linear growth. Exponential growth provides greater profits much faster. Linear growth is a more gradual, steady increase.
Evaluating markets used to require considerable expertise and experience. But with the short-term rental data analysis powered by STR Verifi, you can instantly access key metrics of any market in the US to assess the growth you can expect and forecast ROI.
“Linear growth is a more secure investment and booms and busts are less common with them, but exponential growth increases your profits dramatically. The type of growth you should pursue depends on your situation,”
– Desh Weragoda, mbanc CTO.
Mbanc Hack: Specializing in one type of property is riskier. We advise diversifying property classes and locations for more security and higher revenue returns.
On that note, let’s get into market research. Market research is key to building a profitable portfolio of investment properties, especially in areas you are unfamiliar with.
Several factors come into play, like seasonality, amenities, public transportation access, average daily rate, occupancy rates, and more. Market research is when the short-term rental data fueled by STR Verifi is essential to give yourself an investing edge.
This tool generates a report in seconds with all the data you need to evaluate the market you are considering entering.
Mbanc Hack: For first-time investors, we usually advise investing locally first because you know the neighborhood already. Branch out with your second or third property.
Of course, financing is essential to building a portfolio of investment properties. But several types of financing are at your disposal, like hard money and conventional loans. We usually recommend an interest-only DSCR loan for investment properties.
These types of loans are perfect for investing. With interest-only DSCR mortgages, you don’t have to provide W-2 forms or tax returns. Instead, you qualify for financing based on the projected rental income or rental income history from your property.
And even better? Because they are interest-only loans, you will only pay the interest and not the mortgage for the first few years, meaning you will have time to get your investment property up and running and find tenants so it pays for itself.
To qualify for these loans, you need proof of the monthly ROI. The short-term rental data powered by STR Verifi provides the information you need to get approved for financing and start building wealth through real estate investing.
Mbanc Hack: Follow the 1% rule, which states your property should rent for at least 1% of the total home value.
Grow Your Portfolio
After buying your first property and setting it up, grow your rental portfolio by purchasing another property. Work with a premier lender to use your current assets to acquire new, more profitable properties through financing like:
- Cash-out refinancing
- Home equity loans
- Home equity lines of credit
And afterward? Rinse, repeat, and reap your hard-earned rewards.
Build a Portfolio of Investment Properties with STR Verifi and DSCR Loans
Once you have laid the groundwork and started building your real estate portfolio, your ROI will start snowballing. In time, you will have generated the kind of wealth that true freedom is made of, which is at the heart of the American Dream.
To learn more about STR Verifi and how our DSCR loans can finance the start of your rental investing journey with a fast and easy approval process, talk with our team.