.png)
Investing in real estate is one of the most reliable ways to build long-term wealth, diversify income sources, and hedge against inflation. Housing is always in demand, making rental homes a stable and attractive investment opportunity. If you're considering growing your wealth through rental properties, this guide will walk you through the essential steps to building a successful rental portfolio.
Why Invest in Real Estate?
Real estate is a strong hedge against inflation, as property values and rental rates tend to rise over time, preserving your purchasing power. Housing remains a necessity, ensuring a consistent demand for rental properties, even during economic downturns. Beyond that, rental properties provide a reliable income stream while also appreciating in value, offering a dependable path to wealth accumulation and retirement security.
What Should You Buy?
For beginners, we advise against purchasing commercial or multi-family properties when just starting to build a property portfolio. Instead, we believe single-family homes are the smartest investment and the best place to start when building your portfolio. Why? There are a few key reasons:
A well-priced single-family home with the right resident provides stable income and cash flow.
Single-family homes are easier to sell compared to commercial or multi-family properties making it a more liquid asset than commercial or multi-family properties.
Mortgage interest, property taxes, and repair costs are tax-deductible, reducing your taxable income overall.
Holding onto your property and letting appreciation work in your favor is a proven long-term investment strategy.
Investing in single-family properties is simply less risky compared to the complexities of owning and managing multi-family or commercial properties.
Steps to Build Your Portfolio
.png)
1. Define Your Goals and Strategy
As with any new endeavor, it’s important to set realistic goals to guide your decisions and keep you motivated. When starting out in real estate investment, start by setting a one-year goal, five-year goal, and ten-year goal for your portfolio. Begin by defining your ten-year goal (e.g. to own 10 rental properties) and work backward to your five-year and one-year goals. We find it’s also helpful to break your one-year goal down even further into what you want to achieve each quarter of the year. Remember, it’s easy to get swept up and set overly ambitious goals, especially ten years down the road. Building a portfolio takes time, so avoid overly aggressive goals and think realistically.
Once your goals are clearly outlined, decide on your investment strategy: long-term, flipping, or wholesaling. Each option has its pros and cons but we believe in the long-term rental strategy as it is less risky and remains a solid way to build wealth.
2. Find Your Market
A key foundational step when building your portfolio is deciding whether to invest locally or out of state. If your local market is expensive or offers limited opportunities, consider out-of-state markets with strong rental demand. However, if your area offers good investment opportunities, it can be preferable to purchase locally. Whichever option you choose, you need to start by doing your homework and conducting thorough research. We recommend you conduct your research in three stages: city, neighborhood, and property.
When researching a city, look into a few core market fundamentals, including job growth, population trends, and landlord-friendly laws. You want to choose a city that is consistently improving and growing in order to have the best shot at property and rental rate appreciation.
Once you have chosen a city, identify the best neighborhoods to purchase in. We usually rank neighborhoods on a scale from A to D which we define as such:
A-Class: Expensive neighborhoods with great appreciation potential but very little investment opportunity because most properties are owner-occupied.
B-Class: Upper-middle-class neighborhoods with solid appreciation potential and more investment opportunity than A-Class neighborhoods.
C-Class: Working-class neighborhoods with solid houses offering steady income and long-term appreciation.
D-Class: High-crime neighborhoods with older properties that require more rehabilitation and much lower appreciation potential.
Now that you have made a shortlist of your desirable neighborhoods, you need to define your ideal property criteria or your "buy box". An example of a buy box is:
C-Class neighborhood
3-bedroom, 2-bathroom
1,200-1,500 square feet
Brick ranch-style
If you are investing remotely, we recommend you assemble a strong local team (investor-friendly agent, property manager, attorney) to assist you in finding properties in your buy box. If you do your research and assemble a solid team, your path to a strong rental portfolio will be that much easier.
3. Get Funding
Once you have zeroed in on the kind of investment property you want in a stable neighborhood of a growing city, it's time to figure out your funding. Some of your funding options include:
Traditional Loans – Also known as conventional loans, these are best for those with strong credit (700-800 range).
HELOC (Home Equity Line of Credit) – This funding option allows you to leverage your home equity to fund the purchase of another property.
Joint Venture (JV) Partnerships – This option is exciting and offers a lot of flexibility in the structure and agreements that govern it. Partner with someone who has either the funds or the expertise to purchase and manage rental properties and develop a strategic partnership with them.
Hard Money Loans – This funding option is short-term financing based on the after-repair value (ARV) of a property.
4. Pick the Right Property
Now is the time to start searching for your investment property or group of properties! This part of the process can take some time so we always like to emphasize that searching for a property requires patience. Don't get discouraged if you look at 100 homes before you find one to make an offer on. Here are a few tips to guide you in your search:
Choose properties requiring minor cosmetic repairs (paint, flooring) rather than major structural fixes such as foundation issues or plumbing overhauls.
Ensure the property is cash flow positive after accounting for maintenance costs and property management if you plan to hire it out.
Prioritize low-crime areas with job growth and good schools for long-term appreciation potential.
NEVER Buy These Properties
Avoid common investment pitfalls by avoiding these properties:
Homes Over 100 Years Old – These homes pretty much always present expensive long-term maintenance and renovation issues.
Luxury or Expensive Homes – These properties are harder to rent and may not provide a good return on investment.
High-Crime Areas – Homes in high-crime, low-income areas usually have more vacancies and present increased management challenges.
White Elephants – These properties have significant drawbacks (busy streets, train tracks, powerlines, awkward layouts, steep driveways in snowy regions) that can't be changed or removed. Avoid them at all costs!
5. Search for Deals
Successful real estate investors are always searching for properties and when just starting out, it’s good practice to always have an eye on the market. Here’s how:
Check listing sites (MLS, Zillow, Redfin, Realtor.com) frequently.
Network with local investors at meetups and events.
Look for off-market deals through direct mail or agent connections.
Attend auctions and foreclosure sales.
Stick to your property criteria—don’t buy out of desperation.
Be patient! Real estate is a get-rich-slow game, requiring time, strategy, and perseverance. Unlike quick-flip strategies that rely on rapid turnovers and market timing, successful rental investments focus on steady appreciation, consistent cash flow, and long-term financial growth. It's important to stick to your property criteria and not buy out of desperation. By maintaining discipline and following your investment plan, you can build a stable and profitable portfolio over time.
6. Inspect, Negotiate, Close the Deal!
When you're ready to purchase a rental property, it's essential to follow a structured process to ensure you’re making a sound investment. Running the numbers, working with the right professionals, and negotiating effectively will help you secure a profitable deal. Here are the key steps to take:
Analyze the Property's Financials – Use our Cash Flow Calculator to estimate potential costs, rental income, and overall returns.
Find an Investor-Friendly Agent – Work with a real estate agent who understands investment properties and can help you find the best opportunities.
Conduct a Property Inspection – Hire a professional property inspector to assess the home’s condition and identify all necessary repairs.
Negotiate with the Seller – Use the inspection report to negotiate repairs or adjust the purchase price accordingly.
Close the Deal – Finalize the purchase, complete all required paperwork, and officially add the property to your portfolio!
7. Manage the Property
Once you officially own a rental property, it's important to decide whether to self-manage or hire a professional property management company to handle the many operations required by a rental property. These responsibilities include but are not limited to marketing your property, screening residents, collecting rent, handling maintenance and legal compliance, managing turnover and lease renewals, the list goes on!
If you’re an out-of-state landlord or simply want less hassle, consider hiring a property manager to ease your burden and maximize your investment property’s success.
Extra Tips
Stay Consistent
Consistency is key to building a rental portfolio—steady growth ensures long-term success rather than just purchasing one property and stopping.
Stabilize Your Portfolio
It's also important to know when to stabilize your portfolio. If cash flow becomes tight or managing multiple properties feels overwhelming, it's wise to pause new purchases and focus on optimizing your existing investments instead.
Final Thoughts: Real Estate Wealth Is Within Reach
We hope you now have all the tools you need to become a real estate investor and build a thriving portfolio. If you want more support, consider working with Evernest. We specialize in helping investors start and grow their rental portfolios. Our team offers expert advice, access to off-market deals, and full-service property management to make investing easy, whether you’re local or out of state. Start today and take the first step toward building long-term wealth through real estate!
