How to Create a $1 Million Real Estate Portfolio Getting into real estate investing is a natural progression for many entrepreneurs as the current market is one of the best for securing your money's value.
By Sean Boyle Edited by Micah Zimmerman
Opinions expressed by Entrepreneur contributors are their own.
I've done stocks, I've done crypto, but real estate was something I really wanted to get into. The number one reason was to gain passive income every single month. If my mortgage is $2,500 a month and I can get $3,000 in rent, then I will have $500 generated passively that I can use for whatever I need. Multiply this with a few more properties, and that income starts to add up considerably. With this in mind, I bought three properties this past year using a customized strategy that works!
My investments
My first property was in Old Kensington, Philadelphia. It was a brand new construction, with a 10-year tax abatement and a one-year builder's warranty. My plan was to live on the third floor and rent out the three other bedrooms so I could live there for free. The purchase price was around $350,000, and at the time, new houses were going for anywhere from $370,000 to $385,000 in the area. So I already had at least twenty thousand dollars in equity to beat the market.
I purchased this property with my business partner. We split the down payment and got a conventional first-time buyer's loan. Together we had to invest $18,000 out of pocket to receive $500 each in passive income per month.
The second property I bought was a newly renovated house in an area close to the University of Pennsylvania. Unfortunately, I couldn't command the same loan since this was considered an Investment property. So I had to pay a little more out of pocket; it was around a 20% down payment. So at around $230,000, I had to invest $40,000 of my own money upfront.
However, most houses in the area were going for $250,000 - $260,000, so again, I could beat the market and gain some equity. Even though $40,000 is a lot of money when you consider that I will be making $1,000 per month passively in less than four years, that down payment will be returned entirely.
Just a few weeks ago, the third and final property I bought was in South Philadelphia. This house was newly renovated, which was excellent, but I could not receive any tax abatements for it, which bites. Without the tax abatement, I would have to pay around $500 per month in taxes, as opposed to $60. I used an FHA loan for this property, which means I would have to live in this house. Though, by renting out the other rooms, I can still make more from my tenants than I am spending on the mortgage and taxes.
Related: How To Get Started in Passive Real Estate Investing
My strategy
You must do these three things to find success in real estate investing:
The number one thing I would recommend is finding a strategy that works for you and your investment goals. Now my strategy is cut, dry and simple. I only buy single-family homes that are below the median price and are newly renovated or new construction.
All of my investments follow these rules. If a home isn't below the median or recently constructed or repaired — I don't buy it. Many beginner investors jump into properties that are simply not a good deal or are overpriced.
With patience, you can find a nice-looking home in an excellent area for less than the average price of similar homes. It is a big investment, so if it's not a good deal from the get-go, I will stay away. The capital you save from buying below the median can be saved for emergency repairs, interior decorating, or simply to keep money in your pocket.
I am not making money by flipping houses, and I don't have the time to deal with repairs and renovations. This is why new constructions are ideal for me to buy. A new property will have little to no repairs needed and is much easier to deal with as a landlord. All of my properties are new, except for one that just received tons of renovations, so I won't have to deal with any issues or repairs.
Related: 8 Proven Ways to Make Money in Real Estate
The second thing I recommend is getting a real estate mentor, especially if you're trying to achieve your goals quickly, like me. Whether it's an investor or an agent, they will help you make better decisions in a market you may not yet fully understand. My mentor is a realtor and an investor, and I couldn't have gotten this far without them. A real estate mentor will bust their butt to ensure you're getting a good deal and cut the learning curve in half.
The third part of my strategy is to simply believe in yourself. Investing in real estate is a big step in life, and the curious might be too intimidated to jump in. Any goal can be achieved with practice, patience and a good strategy. Follow your vision.
The rich and successful take small steps to accomplish large goals. Imagine a ladder, and take one small incremental step up every day, rather than being the person who has these monstrous goals but can't even reach the very first step.
Related: 10 Tips from the Real Estate Passive Income Playbook
Believe in yourself
Using this strategy, I built a 1 million dollar real estate portfolio in just ten months. I started as a total beginner, but with the help of a mentor, I got great deals and excellent properties that generate passive income each month. It was my goal to invest in real estate last year, and now that I have achieved this, I can take another step forward on my ladder and continue to grow.
I hope my story and strategy can help you with your goals in 2023!
Note: It's important always to research and make decisions regarding any investment. This is not financial advice; information and prices can change over time.
