Risk is inherent to any investment strategy. We make decisions about the future based on what we know today. And while there are smart ways to go about doing this, we can never completely eliminate the possibility that our investment will fall short.
The good news is that when your investment does well, it can do really well and help set the foundation for building multi-generational wealth for you and your family for years to come.
How to Grow Your Investment Portfolio While Minimizing Risk
Actively growing your real estate investment portfolio while minimizing risk is possible when you adopt a strategic approach. Here are some suggestions for successfully growing your investment portfolio.
- Research – Any good investment starts with research. Conduct a market analysis to understand the area. Evaluate historical data as well as future growth potential. Understand the population, infrastructure, rental market and other economic indicators before diving into a new property.
- Diversify – Perhaps the golden rule when it comes to risk reduction – diversify, diversify, diversify. By spreading your investments across different types of properties and/or locations, you’ll help mitigate the risk of being overly exposed in any given area or market.
- Partner – Consider engaging a reputable property management company to handle the day-to-day operations, tenant screening, rent collection and property maintenance of your properties. Though it may sound counter-intuitive, paying for professional management can actually help you save money and increase your net operating income (NOI). They do so by minimizing vacancies, handling tenant issues and reducing your workload and risk, among other things. They can also help you optimize your operational costs to increase your overall cash flow.
- Network – Surround yourself with experienced professionals and network with other like-minded investors. We can always be learning from each other, and when we do, we can avoid mistakes and make more informed decisions that help reduce investment risks.
- Review – An important step in managing a growing real estate portfolio is to assess performance. On a regular basis, you should review key metrics for each of your properties, including cash flow, NOI, vacancy rates, and other market-specific data that inform your investment.
Building a successful real estate portfolio requires you to make strategic decisions every step of the way. Balance the risk with rewards as you assess market and property conditions, and always be learning – both from your data and those in your growing network.
To learn more about owning rental property in Central Ohio, get in touch with us at RL Property Management. We’ve been professionally managing rental properties in the greater Franklin Counter area for more than a decade and have the expertise and professionalism to help you get the most out of your strategic investment.
