Owning multiple properties has always been a well-known investment strategy. And just like with any form of investment it comes with its own pros and cons. Below we are going to discuss some of the advantages and disadvantages to owning multiple investment properties. 

Advantages to owning multiple investment properties include…

Increased Income

Owning multiple investment properties can be quite a lucrative route. The more rental properties you have, the more sources of income you have. Adding investment properties to our portfolio is a great way to enjoy passive income. This is often an attractive option for those looking to make money in a hands-off kind of way. 

Diversification of Investments 

They say don’t put all your eggs in one basket! Investment properties are a great way to add diversity to your portfolio. It is also a great way to create an added layer of security within your investments because people are always going to need a place to live! 

Property Value Appreciation 

Holding onto a property and renting it out as opposed to selling it can be a smart financial move, as it lets you sell when the market is hot and give you an opportunity to maximize your profits. This option allows you to sell at the right time. The appreciation with each property will continue to grow. 

Financing New Opportunities 

Once you have one investment property it is easier to leverage that to create more investment opportunities. Like a chain reaction. One property is going to help you get your next. Having multiple properties makes it easier to use as leverage for your next. 

Disadvantages to owning multiple investment properties include…

Upfront Costs 

One of the biggest disadvantage or challenge to multiple investment properties are the upfront costs. To get started you will need more capital. And this can be a tricky thing. Opposed to a house you plan on living in, investment properties do require a larger down payment, meaning you need at least 20% of the down payment to take on a rental property. 

Added Work

After some time, an investment property may become like a well-oiled machine and mostly take care of itself, however that may take some time. At the start there may be extra time, energy, and money that needs to go into the place. This might be a big consideration for someone who doesn’t have a ton of extra time, energy, or resources to get started. 

Finding Tenants

And not just any tenants. You’ll want to put time and effort to make sure you get the right people living at your property. Tenants can make all the difference and having the wrong tenants can really throw a wrench in the plan. Having the time and resources to find the right tenants is crucial.  

When to buy additional properties

If you are interested in purchasing additional investment properties, aside from the pros and cons, you will have to consider when the best time is to buy additional properties. The three big factors to take into consideration when purchasing an additional property are, budget, the market, and your time and energy. 

Budget

When it comes to budget within your investment properties there are a few questions you’ll want to ask yourself. First is getting clear on what your budget is. Will the property need any work down? Do you have the down payment/capital ready? These are all things you’ll want to get clear on when deciding if it’s the right time to buy that next property. 

The Real Estate Market

Before diving into your next investment property purchase, consider looking into the real estate market for a bit of insight. Are you going to be operating in a buyer’s market? Is it overly competitive right now? Would it make more sense to hold off and wait a little while to get more bang for your buck? Things to also consider when looking at the market is the location, you’re looking in. Some neighbourhoods are more coveted than others and with that comes a hotter and more expensive market. Get an idea of what renting looks like in the area you’re hoping to purchase in. Bottom line, do your research and make sure you’re comfortable with the market you’re working with. 

Your Time and Energy

One of the biggest things to consider when looking at diving into that next investment property, is your personal capacity to take on the project. It may cost a lot of time and energy upfront. This will also be the case if you plan on managing the property yourself, as opposed to hiring in a management team. Consider what personal resources (time/energy/mental capacity) it will take to have an additional property on your plate. If you feel that you have the personal capacity and resources, you feel comfortable with the market, and you have the budget, these are all green lights to purchase that next investment property. 

 Final Thoughts 

Owning multiple investment properties can provide both personal and financial benefits. For some, purchasing investment properties might be a right now option, and for others it may be something to consider further down the road. Or perhaps some may consider completely different investment options altogether. What it really comes down to is finding what is going to work best for you and your current situation.