How to Start Building Your Portfolio of Investment Properties… Winning Strategies From Expert Real Estate Agents
Are you thinking about your financial future? You may have a 401k or other retirement plan through your employer or a brokerage account of your own. But why stop there? Have you considered other investment opportunities to diversify your portfolio — like, for example, luxury real estate?
At HOAG REAL ESTATE, our expert real estate agents have completed thousands of transactions throughout the Portland metro area, Columbia River Gorge, Bend, and the Oregon Coast since 1991 totaling over $1.4 billion in real transactions closed. We help our clients find the perfect property for their needs, whether it’s their first home, an investment property, a luxury condo, or a working vineyard in the Willamette Valley or Columbia Gorge.
Ask yourself, “Why am I buying?”
Will your purchase be your primary residence, a vacation home, or an investment? Each requires a different approach and includes unique considerations. We’ve previously written about how to buy a vacation home, so today let’s look more closely at investment properties.
Will your investment property need to generate revenue?
Are you considering your purchase to be a long-term investment where you’ll realize your return down the road when it comes time to sell? Even if this is the case it may be possible to generate revenue in the short-term through:
- Leasing — read more about HOAG REAL ESTATE’s property management services
- Short-term vacation rentals through Airbnb, VRBO, or other channels
- Rental as an event or commercial space — generally a better option for properties with acreage or uniquely designed single-family homes
Remember to consider the tax implications of using your investment property as a revenue-generating business. Talk with your lawyer and/or CPA about how to structure the purchase and business to minimize your tax liability.
Where to buy
When thinking about investment properties, the biggest values with the biggest ROI can be found if you think about the future. The hottest neighborhoods and locations today may be nearing their peak. If you’re able to get in early on an up-and-coming area you might see a much bigger return in the future. Recently, here at HOAG REAL ESTATE, we’ve seen growing interest in homes, estates, and properties outside of the Portland area, including homes in The Columbia Gorge, the Willamette Valley, and on the Oregon Coast.
When purchasing an investment property, take the time to look at how the market may evolve (don’t worry, your real estate agent at HOAG REAL ESTATE can help!), and think creatively and “outside the box.” A smart, forward-thinking decision today could pay off BIG in the years to come.
THE DATA IS IN: 11% of the world’s richest people built their fortune through real estate investments!
What to buy
There has never been a better time to be a real estate investor. There are just so many options available to you.
One of the most common forms of real estate investment, a single-family home can be monetized as a rental property or vacation home. But upkeep costs may be higher and the value of your investment can change depending on the desirability of the neighborhood/location.
Estates or properties with acreage
Vineyards, equestrian properties, and country estates make great vacation homes or rentals for corporate retreats. They can even be home to businesses that provide steady income. However, like a home, bigger estates may carry bigger operating and maintenance costs.
If you’re passionate about wine, horses, or the outdoors, you may find that owning an estate or vineyard is a dream come true!
Condo, apartment, or townhome
More common in Downtown Portland and other urban areas, smaller properties can make excellent investments. There’s often the opportunity to lease the property and unlike a home, upkeep costs are generally lower. Association fees, however, may increase your out of pocket cost.
Mistakes to avoid
Making any investment, let alone a property investment, is a serious decision and one that shouldn’t be made lightly. Here are the most common mistakes people make when purchasing an investment property:
Not understanding the market
Real estate investing is complex. Without the help of a seasoned broker, like those at HOAG REAL ESTATE, you’re not doing much more than guessing. We have decades of experience and thousands of transactions under our belts. We know the area and can help you make a smart investment.
If your plans for your newly purchased investment property includes renting it out, plan wisely. You’ll be responsible for any maintenance issues (which might have to be resolved quickly to satisfy your tenants), and will also have to pay to repair damage caused by lessees. In addition to these costs, you must remember the general cost of upkeep as well as taxes or association fees (in the case of condos/townhomes).
While market changes may result in a quick profit, real estate is usually considered a long-term investment. Beyond this, real estate is less liquid than other investments. Stocks can be easily sold at a moment’s notice, but a real estate transaction will likely have a longer timeline.
Actually using your investment property, either as a vacation home, pied-à-terre, or primary residence, can provide a little more flexibility. You’ll be able to enjoy your property while its value as an investment appreciates!
Making an emotional decision
Real estate is often very personal — think about how you felt when you saw your first home. Was it love at first sight? Buying an investment property is a very different experience. You must put emotion aside and think logically. Will this investment provide the returns you want? Are the risks too high? Am I willing to wait out a tough time in the market or will I panic and sell at a loss? Good investments are rational and logical decisions. Don’t let emotion get in the way.
Thinking about buying an investment property? Let’s talk!
HOAG REAL ESTATE knows the greater Portland area, the Columbia Gorge and we have the experience and results to back it up. See for yourself why our brokers are known as among the most knowledgeable and dedicated in town. Contact us online for more information about buying or selling property.