One of the best ways to build wealth and generate income is to invest in property—and there are few better cities in the United States for property investment than Austin, Texas. If you already have a rental property in Austin, you’ve probably experienced this firsthand. You’re likely already making a monthly profit, and you may have seen a substantial gain in the value of your property.
But if you’re interested in something more, you may need to work on expanding your investment property portfolio in Austin. What’s the best way to do this?
Why Expand an Investment Property Portfolio?
First, let’s explain the main motivations for expanding an investment property portfolio. Investing in new properties can help you with:
- More income. If you currently have one property generating approximately $300 in profits every month, it stands to reason that adding a new, similar property could raise that to $600 in profits every month. The more properties you add, the more your income will grow.
- Diversification. Expanding your portfolio is also a method of diversification; diversifying your investments is important to mitigate risk and stabilize your income. This way, if a single property suffers from tenant vacancies or an eviction scenario, your entire strategy won’t suffer as a result. You can also get exposure to new neighborhoods, minimizing the prospective strain of localized downturns.
- New opportunities. Investing in new properties is the only way to get access to new opportunities; if an attractive property in a promising Austin neighborhood is listed at a great price, you can take advantage of it.
Choosing New Types of Real Estate
Depending on your goals, you may choose to continue investing in similar patterns, or you may expand to invest in new types of property. These are some of the most common investment options in Austin:
- Single-family rental units. Single-family units tend to be simple and easy to maintain, capable of generating consistent revenue. However, they also struggle with vacancies; adding multiple single-family units can mitigate this risk to cash flow disruption.
- Multi-family rental units. Multi-family units are similar in nature, but offer the capacity for multiple families to live in the same building. These tend to be more complex to manage, but they’re also more resilient to vacancies.
- Apartment buildings. Apartment buildings are even more resilient to vacancies, and are capable of generating a significant stream of revenue; however, they’re also much more expensive, and they typically require significant time and/or money to manage.
- Commercial real estate. If you’re looking for something different, you could also get started with commercial real estate. You can rent your property to local businesses, purchase land for potential development, or even flip certain properties.
Expanding Into New Neighborhoods
Most Austin property investors attempt to build their portfolios by expanding into new neighborhoods. There are several advantages to this approach, including:
- Greater prominence throughout the city. Expanding into new neighborhoods increases your physical footprint in the city. This gives you more total territory, and can give you an “in” to investing in new properties in each area.
- Risk mitigation. Though Austin is, overall, on an upward trajectory, there’s no guarantee that each of its constituent neighborhoods will be invulnerable to unexpected downturns. If you hold all your properties in one concentrated area, and that area plunges in terms of quality or attractiveness, it could wreck your portfolio. Investing in many different neighborhoods will mitigate your risk.
- A wider range of options. Being open to investing in properties throughout the city also grants you a much wider range of options. Instead of being confined to a few square miles, you’ll be able to search for great deals everywhere in and around Austin.
Expanding in a Single Neighborhood
Alternatively, you can invest in new properties within your current neighborhoods. There are advantages to enjoy here, including:
- Capitalizing on existing experience. If you’ve already spent time in this neighborhood with an investment property, you know some of the strengths and weaknesses of this area. You’ll therefore be able to spot good deals as they come up, and you’ll know what makes for a “good” or “bad” property in the area.
- Getting the best deal. Looking for a new property in the same area can also help you get the best possible deal. As you maintain your existing property, you’ll be able to keep an eye out for new properties that are listed, and you may be able to make offers to property owners you know in the area. Additionally, you may build relationships with other rental property owners, who can offer you great deals in the future.
- Managing the neighborhood. Over time, as you add more properties to your portfolio in this specific area, you’ll be able to exercise more control over the neighborhood. If you’re the one managing these properties, keeping them in good condition and beautifying the area, you can attract more tenants (and higher prices). The more properties you add here, the better.
Expanding Beyond Austin
If you want to expand your portfolio further, increasing your income and diversifying your holdings to mitigate risk, you’ll need to look beyond Austin. There are a number of cities in Texas worth exploring, and with the help of a property management firm, you’ll be able to manage those properties effectively—even if you live far away. If you’re very ambitious, you may even consider investing in another state, or another country.
Getting Access to Funds
One of your biggest hurdles will be getting the funds to invest in property, but if you have an extra stream of income from a current property, you’ll have a direct path forward. Alternatively, you can seek funding in the form of a bank loan, or work with an investment partner.
Are you interested in acquiring more rental property in Austin? Or do you need more assistance managing your current property portfolio? Contact Green Residential today to learn more about our property management services, or to enlist our help in buying property in the Austin, Texas area!