3 Innovative Ways to Expand Your Rental Property Portfolio

Did you know that 9.72 million tax-paying Americans have at least one rental property in their portfolio in 2024? As far as an investment strategy goes, it makes a lot of sense. Over the past ten years, a time inclusive of the Great Recession and COVID-19, American home values grew by more than 100%.

Property’s great returns are just one of the benefits; there is also the fact that, as far as investments go, it’s relatively stable. Compared to the share market, property is considered a fairly safe way to invest your money.

If you are at all future-focused and looking to build yourself a rental property portfolio, it makes sense that property would be one of your strategy pillars. You don’t even need a large amount of capital to get started, even less if you are looking to expand to multiple investment properties. It’s all about thinking outside the box a touch.

Versatility, affordability, and convenience with prefab cabins

If you have a plot of land or even space on an existing property, modular cabins can be a quick and cost-effective way to add another rental to the list. Traditional builds can take months (and test every ounce of your patience), but prefab cabins are built in a factory and shipped straight to your site. This process significantly reduces construction timelines, meaning you can have your new rental property up and running quickly.

As they are pre-built in a controlled environment, they minimize material waste and labor costs. Plus, they don’t always require a pricey concrete foundation. A simple gravel base often does the trick, saving you money; plus, as they are designed to be portable, you can move them if plans change. For savvy property investors, prefab cabins are a way to generate income with minimal stress.

Investing in landlord-friendly states

A strategic move for potential real estate investors is to maximize returns while minimizing hassles. To do this, a smart move is choosing spots that offer favorable laws, low costs, and high demand – the perfect mix for rental property ownership.

Landlord-friendly states typically have laws that prioritize property owner rights. For example, eviction processes enable landlords to promptly address non-paying or problematic tenants, minimizing potential financial losses. These states also often lack stringent rent control laws, so landlords have the flexibility to adjust rental rates in response to market conditions.

Low property taxes are another attractive feature. States like Texas and Indiana offer significantly lower property tax rates than the national average. This increases net profits and reduces the financial burden on property owners.

Landlord-friendly states should be considered as states with growing economies and high rental demand. Examples such as Florida and North Carolina benefit from strong job markets, attracting tenants who require stable housing. A high demand for rentals ensures low vacancy rates and consistent cash flow.

Use equity to drive your portfolio growth

Once you have one property under your belt, leveraging equity is a powerful strategy for expanding your portfolio without relying solely on savings. Equity is basically the difference between your property’s current market value and whatever amount is left to pay on your mortgage. As property values increase, this gap widens, creating an opportunity to borrow against that value and reinvest in new properties.

One of the key advantages of using equity is its efficiency. Rather than waiting years to accumulate savings for a deposit, you can access funds already tied up in your existing property. If you notice some unbeatable opportunities in the market, you can pounce on them, keeping your portfolio growth aligned with market trends.

As an example, if you purchased a property for $400,000, and its market value has increased to $500,000 you have some equity. If you’ve paid down your mortgage to $300,000, you now have $200,000 in equity. Lenders typically allow you to borrow a percentage of that equity—often up to 80%—which could provide you with $160,000 to use as a deposit for another property.

However, leveraging equity requires careful planning. Increasing your borrowings adds to your debt, so maintaining manageable serviceability levels is crucial. This means ensuring your rental income and other financial resources can comfortably cover loan repayments and associated property expenses.

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