As the Houston real estate market continues to grow, more people than ever are developing an interest in real estate investing and expanding their existing real estate portfolios.
As a new or experienced investor, you may not be sure which steps you should take to grow your real estate portfolio, but our team at HNB Realty is happy to share our expertise.
As a boutique asset management and investment consultancy designed for private investors by private investors, we have experience to support your growth.
For starters, some of the primary goals of building a real estate portfolio are to help you reach certain financial objectives, create passive income, finding freedom in your career and having the means to retire.
Other reasons worth considering are to get ahead of downward trends in the stock market, inflation, and the volatility of the economy.
Below, explore some of the more effective strategies we recommend implementing to expand your real estate portfolio to help grow your wealth over time.
Establish Clear Goals and KPIs
Getting involved with Houston real estate and its burgeoning market, learning the ins and outs of real estate and increasing the worth of your portfolio are all great ideas – but as you get started, it is important to establish your goals early on in the process.
What do you want your real estate portfolio to generate for you? Your investment goals in any real estate business plan should be specific, measurable, realistic, and functional.
For example, what level of passive income do you wish to achieve to supplement your lifestyle for retirement or other objectives? Do you want to build a business around real estate investing so you can quit your current job and have a safety net?
There is no singular “right” goal that you should be working toward with your real estate investments. Taking the time to identify what you want will make it easier to stay motivated and focused.
In other words, you will be less likely to get distracted and make investments that seem good on the surface but are not in your best interests or in alignment with your long-term goals.
Many real estate managers and investors utilize Key Performance Indicators (KPIs) as benchmarks against how progress can be measured in real estate investing. They have been proven to be a vital asset that manages the cost of real estate, facilities, and associated infrastructure.
There are many different examples of KPIs commonly used to track and measure productivity and success.
Occupancy and Vacancy Rates
Every property manager needs to know the occupancy rate of their portfolio at any given time. Likewise, keeping up with trends and the economy to reason any spike or decline in vacancy (e.g., Covid-19 Pandemic caused vacancy rates to rise).
It can also help you assess your rates. For example, if your occupancy rates are high, there may be a question of whether or not you are charging enough for rent.
It’s common for tenants to turn over every few years. Monitoring your turnover rates is essential. If your number is above the market average, this could indicate that the property needs better tenant management.
Repair and Maintenance Costs
These costs are often the most significant financial hit for property owners. Most of them will be able to find cost savings if these numbers are monitored regularly and competitively priced among your property manager’s contractors.
Manage Existing Properties
If you already own rental properties, consider partnering with a property management company like HNB Realty to handle the day-to-day tasks associated with keeping them up and running.
A property manager can handle everything from rent collection and lease execution to scheduling inspections and calling repair professionals to address maintenance requests.
When you outsource property management to another professional, you free up valuable time and energy to handle other aspects of real estate investment, including searching for new properties to add to your portfolio or researching other investment methods.
In addition, property managers have access to professional rates due to the volume of business they outsource to contractors, making their management fees very palatable.
It can be challenging for some real estate investors to loosen their grip and outsource tasks to someone else.
However, this is one of the most effective ways to scale your business. Not only does it provide you with more freedom and bandwidth to focus on other things, but it also sets you up for more long-term growth.
Utilizing the 1031 Exchange to Scale Your Portfolio
What is the 1031 Exchange?
Many real estate investors really begin scaling their investments once they start utilizing the 1031 Exchange, often referred to as one of the most powerful tools for investors.
In real estate, the 1031 Exchange refers to a swap of one investment property for another that allows capital gains taxes to be deferred. This term refers to an IRS code, 1031, that is used by real estate investors, title companies, and any other entity involved with real estate.
The 1031 exchange allows you to essentially “trade” one investment for another more valuable asset while deferring capital gains. In short periods of time, this method can help you scale your holdings without handing over your profits to the IRS.
There are several moving parts to the 1031 Exchange, none more than a detail that can be commonly overlooked. This exchange, most importantly, can only be made with “like-kind” properties.
However, there are no limits to how many times or the frequency you can use the 1031 Exchange. This allows your investments to grow tax-deferred. You can roll over the gain from one investment to another and continue to repeat the process.
So, although you may see a profit from each swap, you can avoid taxes until you sell or dispose of the property for cash, which can be years down the line, for example.
Is This Right for Me?
While many would love to utilize this method of investing, it depends on the situation to determine if it is right for your real estate investing journey due to the restrictions of the types of properties that are involved.
The 1031 Exchange does not eliminate your capital gains taxes, it only defers them. This is where the power of the 1031 lies – by repeatedly using these exchanges, you can continue to increase and upgrade your real estate investing portfolio until your net worth surpasses this tax liability.
Despite the lore of the 1031 Exchange, there are many moving parts that can create problems for the new investor. That is why it can be very beneficial to enlist the help of those who understand its complexities.
HNB Realty has a vast amount of experience with 1031 and can offer real estate investment plans that are unrivaled in the Houston area.
Bonus: Work With Trusted Real Estate Professionals
There is a lot you can do on your own to build your real estate portfolio and increase your returns. However, building a team and partnering with other professionals can help you rise to the next level and see more impressive results in the future.
HNB Realty is a boutique firm that offers – specialized advice in real estate, which can help you scale your real estate portfolio and grow your wealth.
Grow Your Real Estate Portfolio Today
Are you ready to learn more about real estate investing in Houston? Do you want to work with a team of experienced professionals to expand your real estate portfolio and maximize your returns over time?
If so, contact us today at HNB Realty to book a consultation and learn more about our services. From property management in Houston to asset management, we offer a wide range of services that can help you become a more knowledgeable investor.