How to Create a Real Estate Portfolio

By eHow Business Editor

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The real estate market is often cited for creating many of the world's wealthiest people. The market does pose a small degree of risk, however, so it's important to create a healthy and diversified portfolio of holdings in this potentially lucrative field. Continue reading to discover where to begin.

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Instructions

Difficulty: Moderately Challenging

Things You’ll Need:

Financing
Down payment

Step1

Research the various styles of real estate investment to learn about the associated risks and benefits before you take the plunge. It is both less painful and less expensive to learn from the mistakes of others than from your own.

Step2

Decide what you feel comfortable with as a first time investment. Many people find rental properties an attractive option. Other possibilities include rehabbing (commonly referred to as flipping), leasing to own, or buying multi-units or commercial properties. Make the decision based on your own research and interests.

Step3

Arrange financing. Financing is often the key to creating a successful real estate portfolio. This is a risky business and many lenders have been burned in the past. For this reason, you often must come up with 20 to 30 percent of the necessary funds as a down payment. Find a lender who is willing to work with you before you look at your first property in order to save time, and avoid headaches, stress and losing out to other investors who have funding in place.

Step4

Buy your first property, and make the first mark in your real estate portfolio. With each new property you purchase you will create a wider and more diversified portfolio of holdings.

Tips & Warnings

Invest in several different types of property to provide some insulation for when markets have hiccups along the way, as they inevitably will. Avoid putting all of your eggs in one basket when it comes to your real estate portfolio.
Have a business plan worked out before you try to get financing. Lenders like to calculate risks; having a clear, concise and comprehensible business plan makes you an attractive risk.