Published by Forbes.com | November 20, 2024
Follow steps to scale your investments by starting small and building on successes.
Once you start investing in real estate, you may be looking for ways to expand. If you’re thinking of scaling, keep in mind that it can take time and you may decide to establish a track record first. After an initial investment, you might be able to access capital and uplevel your game, though you’ll want to avoid overleveraging as you evaluate new deals.
Consider the following guidelines as you move through your own real estate investing journey.
Start Small and Build a Solid Foundation
Scaling often begins with an initial step, and a small investment could help you learn and gain experience. When I spoke with Drew Brenneman, founder of Brenneman Capital, on my podcast “The Insider’s Edge to Real Estate Investing,” he shared his path from buying his first property to building a portfolio of over $200 million. His initial investment was a duplex, purchased while he was still in college. He saved money from his high school entrepreneurial ventures and focused on acquiring cash-flow-positive properties. “I had the money, the numbers made sense, so I bought the deal,” Drew said.
Leverage Existing Assets
Once you’ve made your first investment, you may be able to use it as a springboard. Drew scaled by refinancing his properties, pulling out equity, and reinvesting in additional deals. You might follow a similar path, or you could take different steps depending on market conditions or your business plan. That said, in today’s environment, it may be more difficult to do cash-out refinancing, as lenders are becoming more conservative with the proceeds. On my podcast, Chris Powers, founder and CEO at Fort Capital spoke of using data analytics to know the addressable market.
Build Long-Term Relationships
Reputation is a key component of success in real estate, which I discuss in detail in my book, “The Insider’s Edge to Real Estate Investing.” You’ll want to reach out and build relationships with brokers, lenders, partners, and others in the industry. If you show that you’re active and reliable, you can establish credibility in your local market. You can then draw on that as you expand into others.
Choose Markets Carefully
You’ll want to carry out adequate research before moving into a new region. You can check data related to a city, and look for trends that will help you understand long-term potential. Drew transitioned from investing in Chicago to targeting Sun Belt cities like Phoenix, Dallas, and Austin, which offered advantages including strong population growth and job creation.
