How Many Investment Properties Should You Buy?
This is a question we get all the time at PropertyLark. We have real estate investors in our home buying network who have many different financial goals, so the answer will be different for just about anyone. How many investment properties you should buy will completely depend upon your financial situation and your overall real estate investment objectives. Let’s take a look at a few common scenarios.
Fix and Flip Buyers
Unless you have a large-scale house flipping business that allows you to handle many property purchases, renovations and sales simultaneously—and some of our members do—most fix and flip buyers will be dealing with one property at a time. This is usually a smart strategy for tax purposes and just for being able to handle everything involved with a house flip. First-time flippers often learn the hard way just how complex this process really is. It sure isn’t as easy as the Property Brothers make it look on HGTV!
House flipping is both an art and a skill. It takes practice and successful investors learn from each experience. Every fix and flip brings its own unique challenges and you have to be prepared for just about anything. As you complete more transactions, you tend to get better and better at flipping. Still, for most fix and flip investors, it makes sense to focus on one property at a time—if nothing else, just to maintain their sanity!
Large-Scale Fix and Flip Business
Then there are investors and investment groups out there who have the resources, financing and manpower to handle more than one house flip at a time. How many investment properties should you buy in this situation? The answer is really how much you can comfortably deal with at any one given time. You will likely have multiple investments happening at different times with purchases, renovations and sales overlapping. You might be able to work in a nice cycle as your renovation crew moves from one property to the next as you buy and sell. You may have several contracting crews working simultaneously.
As you refine your business plan, you will likely figure out the ideal amount of properties to have on your plate at any given time. You will also need to consider financing, tax implications and other factors that will make a significant impact on your business. Our recommendation is usually to start small and then build up over time as your system becomes more and more predictable. Ultimately, there may be no limit to how many investment properties you can purchase each year.
Buy and Hold Investors
Any real estate investor knows there is a big difference between house flipping and buy and hold investment where you keep the properties as rentals. There are pros and cons to each style of real estate investing. However, the same principals above tend to apply to income property buyers in terms of how many rental properties you should purchase and own at any given time.
The simple answer is as many as you can comfortably handle. If you are a casual rental property owner, then one unit is probably more than enough. If you are a major real estate investor with plenty of capital and property management resources, then you can own as many rental properties as you wish. Again, most successful investors will build up their inventory, skills, knowledge and resources over time as you add more properties to your portfolio. Eventually, you find that sweet spot for your particular business or you have the ability to keep growing and expanding. Or, you may be perfectly content with just one income property on the side that dependably earns you some extra cash year after year.
In the end, it’s up to you to decide which type of investment is right for you and how many properties you should own at once. Experience usually pays off as most successful real estate investors will start small and build up to a point where they are satisfied. Then, there are those of us who are never satisfied and want to keep growing as much as possible!
Whatever your real estate investment goals, it helps to have a powerful home buying network on your side that helps you run better analytics and find off-market deals in your area. That investment network is PropertyLark. Click here to learn more about what we offer and to apply for our elite network of property buyers.