How would you describe yourself as an investor?
Are you extremely risk tolerant and aggressive with your strategies?
Or are you a more defensive and cautious player, only investing when you feel reasonably certain of the potential gains?
In the rental property investment world, it’s possible to be successful with a wide range of different approaches. But some investors strongly benefit from being more aggressive with their purchases and management strategies.
What exactly does it mean to be aggressive in rental property investment? And how can you make this strategy pay off?
What Is an Aggressive Rental Property Investment Strategy?
Aggressive rental property investment is all about pushing forward. Aggressive investors still need to consider risk, but they’re typically much more tolerant of risks than their passive, defensive counterparts. They’re willing to take out more loans, spend more money, and endure more risks and temporary hardships if it means a more lucrative final outcome.
Aggressive investors act quickly, they make big plays, and they aren’t deterred by volatility or temporary disruptions. This is an inherently riskier strategy, making it simultaneously capable of causing big gains or big losses, depending on the person at the helm.
Strengths and Weaknesses of an Aggressive Rental Property Investment Strategy
Aggressive rental property investment strategies benefit from the following:
- Faster growth. When you’re aggressive with your acquisitions, you’ll typically see faster growth. Each year, you’ll add new properties to your portfolio, attract new tenants, and increase your revenue. If you wait a long time between property purchases, or if you’re very cautious with your acquisitions, your growth will pale in comparison.
- More income. Another benefit is more income. Aggressive investors typically have more units to manage, so they have more rental income to collect.
- More options. As an aggressive investor, you’ll also have more options, you won’t necessarily have to wait for the perfect time to acquire a new property, nor will you be forced to wait for the perfect property to pull the trigger. You’re much more comfortable with options that other investors may not consider.
- Competitive dominance. If you’re willing to take more risks and invest more capital, you can quickly gain a competitive edge. For example, you can buy up multiple properties in a given neighborhood and have a pseudo monopoly over the area.
Of course, there are also some weaknesses to consider:
- Higher risks. Aggressive investing is almost always riskier, and in several different ways. If you focus on buying as many properties as possible, as fast as possible, you could end up being over-leveraged, you could have a disproportionate volume of your portfolio allocated into expensive assets, and you could be more vulnerable to a real estate market crisis. Additionally, widespread vacancies could kill your strategy.
- Less time to act. As an aggressive investor, you’ll have less time to act. Part of an aggressive investing approach means reacting quickly and seizing opportunities – but this also gives you less time to think and plan.
- Growth complications. There are dangers to growing a portfolio or a business too quickly. If you get in over your head, you might wind up with too many properties to effectively manage.
How to Be More Aggressive With Your Rental Property Investment Strategy
What steps can you take to be more aggressive with your rental property investment strategy?
- Prioritize multifamily units. While it’s possible to successfully plan and execute an aggressive property investment strategy with single-family properties or a mix of different property types, multifamily properties are generally superior. They allow you to put down more cash, attract more tenants, and snowball quicker.
- Scout for properties in up-and-coming cities. As an aggressive investor, you can’t afford to wait for 20 years of growth; instead, you need to look for cities that have the potential to explode in popularity over the next few years. These can be hard to find, but once you find one, buy up as many properties as you can.
- Be willing to leverage to the limit. Financial leverage is the term used for investing with borrowed funds – and it can be incredibly powerful. As an aggressive investor, you won’t be as concerned with the risk of overleveraging, which means you can borrow more. You still need to think critically when taking out loans, but you can afford to take on more debt than a passive investor.
- Define clear criteria for pulling the trigger. Act faster and smarter by defining clear criteria for following through with a property purchase. If and when you find a property that meets all of your specified conditions, you can stop hesitating and make an offer.
- Minimize repairs and upgrades. Some property owners like to make their units as attractive as possible to prospective tenants, but if you want to act aggressively, you don’t have the time or budget for this. Instead, minimize your repairs and upgrades by focusing only on the essentials.
- Make big marketing pushes. You need your properties to be filled as quickly as possible, so invest heavily in marketing and advertising. Push your property to more people by taking advantage of many different communication channels.
- Reinvest all your proceeds. Once your properties start generating consistent revenue, you’ll be eager to start cashing in your profits. Instead, it’s better for aggressive property investors to reinvest their proceeds. A year or two of cash flow from a single property can be enough for a down payment on a new addition.
- Churn and burn. Aggressiveness isn’t just about making acquisitions; it’s also about selling and cutting your losses. If you need capital for a more attractive purchase, or if one of your properties just isn’t making enough money, don’t hesitate to sell.
Aggressive investing isn’t the right move for every real estate investor, but it can pay off if you know what you’re doing. With the help of seasoned real estate agents and property managers, you stand a much better chance of being successful with this approach.
If you’re in the market for expert real estate consultants or need help managing your existing property portfolio, contact us today!