Building Your Portfolio At A ‘Goldilocks Pace’

By

It is the truth that riding a bicycle can get you into shape and help you to live a long-term and sustainable life. However, it is also true that jumping on a bike for the first time in years and sprinting at Olympic pace can do the exact opposite make you unwell to the point of needing rescue or even hospitalization leading you to swear off cycling forever.

This is exactly the same with investing in real estate. If you start off building your portfolio at too quick of a pace it can lead to disaster. In fact, building your portfolio slowly and steadily, rather than explosive growth all at once, can lead to you achieving your Olympic Level financial goal But building it fast and furiously can lead to catastrophic financial and emotional issues.

But What Is The Right Pace To Grow?

Every investor must understand that there is no right or wrong pace. One investor ‘s pace can be too fast while others would think it was too slow. Finding the right portfolio growth speed is one of the foundational pieces to long-term sustainable wealth creation. For some who already have a strong financial background and available resources, their pace may be quite quick. While for others just getting started on the journey of taking control of their financial future, the pace will be slower and more methodical. There is no right or wrong pace the pace is only right or wrong if it does meet the individual investor s goals, strategies, and ability. Moreover, invest depending on your capabilities. If you are just starting, you can do investments like fixed deposits or real estate, whereas if you have the great financial condition, you can also buy stakes in a company (for instance, a company called Ion acquired Acuris recently, which you can learn more about through news) to improve the probability of monetary profits.

I am not suggesting that portfolios can t (or shouldn t!) expand quickly if done correctly. However, I see too many investors feeling intimidated (or even embarrassed) by the pace at which others are buying. That s true folly, like comparing your cycling ability against an Olympic athlete (or if I were to be brutally honest, some use this as a good excuse to hide behind so they never have to get started).

Real Estate Investing is NOT a Race or Competition

Strategic investors only measure themselves against their stated goals that s it. They can be inspired by those who are enjoying quicker investing success, but they don t allow themselves to feel less successful because their pace is slower.

Investing in real estate should never be considered a race that has to be finished in as short a period of time as possible. Relax – there truly is enough to go around for everyone. Unmetered speed leads to horrific accidents financial accidents that take years or even decades to recover from. The strategic investor will focus on finding their

Personal Goldilocks Portfolio Building Speed: Not Too Fast, Not Too Slow Just Right

The pace at which an individual chooses to build their portfolio should be analyzed as part of their due diligence and strategic plan. It all begins with an honest assessment of themselves, their investment acumen, their investment capital, their risk tolerance and the size of portfolio they wish to end up with.

Leverage of the Non-Financial Kind Plays a Major Role

No matter at what pace you wish to build, financial leverage – a.k.a. borrowed money – is the fuel that drives that growth. However, it s terribly short-sighted to think that you only leverage money. Strategic investors know that money is only one element that one must honestly assess when deciding growth rate.

Yes, you need money to close deals regardless of whether it s from your capital, your cash flow, your partners or your banks. But leverage, in its purest sense, is strategically used in many different aspects of portfolio building. For instance, knowledge, information and contacts are three other elements a strategic investor leverages. None of these can be used effectively unless you are surrounding yourself with other legitimate investors:

1. Leveraging Knowledge: Knowledge of strategies and tactics used to create wealth in real estate can be strategically shared and leveraged with other investors. For instance, at the Real Estate Investment Network, the Members all share our discoveries, our insights and our system improvements every month when we get together across the country to discuss and analyze what s occurring in the real estate markets and the economy. We then continue these discussions, debates and insight sharing in the discussion forums at www.myREINspace.com (Give it a try. If you have a question, post it and see what types of discussions it sparks). By leveraging each other s experiences and discoveries we all become better investors, we all reduce our market risks and we all increase our individual returns on our personal investments. We hold the power of a nationwide network that has over $4 Billion of investment experience.

2. Leveraging Information: Strategic Investors know that gathering unbiased and unemotional information on economies, regions, neighbourhoods and properties is next to impossible to do all on your own it is more effective and quicker to leverage information from sources you have come to trust. Tim Horton s or Wal-Mart do not open a store without doing extensive research on the market and neither should you buy a property in an area you don t fully understand.

Unbiased information means not just getting information from someone who is trying to sell you a property. As I am sure you are aware, you don t go out and buy a car because a sales person says it is great; you always do your homework using information from independent reviewers and ratings agencies. This is similar in the real estate market. Sure, a quality professional realtor can be one source of good information on a region, but just like buying a new car, you should always do your own independent research to verify the market. For instance, you can tap into our unbiased research such as the detailed reports outlining the Top Investment Cities in British Columbia or Alberta or Ontario.

Or you can tap into the findings and experience of other investors in the region (as long as they aren t trying to sell you a property) as their findings will tend to be unbiased. Another good place for unbiased economic information is the local Economic Development Department for your chosen region.

No matter where you receive your unbiased information from, verify it, leverage it (by comparing the findings of many sources) and then use it to mitigate your risks.

3. Leveraging Contacts: It is next to impossible to build your portfolio at a decent pace while mitigating your risks without a trusted team on your side. Leveraging their extensive experience (especially in their area of expertise) can be a very effective strategy. As you build your team you can also leverage other investors experiences with professionals to choose your own team members. By speaking with other investors you will quickly discover which team members you want to add to your life and which ones to avoid. Leverage their experience to avoid adding a big reputation but poor results member to your team. Once you assemble this team, tap into them. Use them to help mitigate your risks, lower your taxes, increase your returns all while saving you vital time and energy.

One example of how this leverage works in the real world is in the world of finance. It is a known fact that the best financial institutions for investment real estate mortgages are constantly shifting. The bank that was great last year is now much too difficult or has stopped lending on investment properties completely, while the bank who said no for years can now become one of the easiest to get funding with. By leveraging other investors experiences you can stay ahead of this often frustrating cycle and therefore you aren t wasting your time with a bank that will eventually say no anyway. Find ways to put yourself in a position to regularly be surrounded with successful investors and keep asking, keep talking, keep listening and keep sharing your discoveries with them.

WARNING:

1. Never become a pain by just wasting the time of other investors. You don t want to become the person who, as you approach, puts dread in another investor s heart as they think, Here we go again. They are building and managing their portfolio as well so their time can also be busy and shouldn t be taken for granted.
2. Always be aware of the amount of time and information you are looking to gain. Politely ask if they have the time to answer a question or two. If they say yes, go for it, but conversely if they say no, not right now, be polite and understanding and appreciate their honesty.
3. Never ask another investor their actual financials (unless you are considering a joint venture) – they ll share them if they feel comfortable. This seems like a strange one, but it occurs more often than you would think.
4. Always add to the conversation one way or another; knowledge cannot be a one way, unbalanced street. In order to continue to leverage your and others knowledge the conversations have to be give and take. Sure, at the beginning you may be receiving more than you are giving, however, eventually you will be adding just as much and quite frankly passing on your and their information to others as you help them grow.
5. This really should be number one on the list: ALWAYS, ALWAYS, ALWAYS find a simple way to thank someone who has helped you along the way, no matter if the help was big or small.

Playing at the Sophisticated Level

A high percentage of beginner investors struggle with the notion of what it means to leverage their real estate expertise. Novice investors worry they don t know enough and veterans forget their advanced knowledge of real estate is what separates them from the pack. So what sets real estate experts apart from others? Strategic real estate experts understand the value of leveraging all of the above points and that is why:

1. They are willing to talk about real estate, what they do and how they do it with anyone who asks.
2. They understand that they are not creating competition by sharing their expertise and experiences they are increasing the quality of investors in the industry.
3. They act with confidence, credibility and integrity; they under promise and over deliver.

What Does All of This Mean?

As you build your portfolio at your own personal Goldilocks pace, you will need to find ways in which to leverage all aspects of your business from finance to contacts, from knowledge to assets. It is true that a steady pace is much more effective than building in spurts.

Buying the right properties is much more critical than buying a certain number of properties. Over the long run – and yes real estate is a long term play – building a fast paced portfolio of below-average properties is much worse than a steady pace of well-chosen, strategically positioned properties. A healthy property added to a healthy portfolio will only make it grow. An unhealthy property can destroy a whole portfolio and all the hard work put into it.

My Suggestion

Over the last 20+ years I have been asked the Pace question hundreds of times and my answer has always been the same. Self-assess where you want your real estate to take you financially. Self-assess what knowledge you have, what knowledge you need and go out and fill that gap. Self-assess what assets and contacts you have and see where the gaps are then fill them.

Then and only then do you start building your portfolio and build it at a pace that you are slightly uncomfortable with. That pace should feel like a bit of a stretch but not a panic. That is when you know you have found your Goldilocks Pace.

As your portfolio grows, so will your intangible assets of knowledge, experience and contacts. Continue to leverage these intangibles, not just your financial assets. You can never know everything, know everyone you need to know, nor have assisted everyone who would love to leverage your insights. Keep giving, keep growing and build your portfolio on a strong foundation.

began his investing career in 1985 with a house purchased in Mission, BC. He is Founding Partner and Senior Analyst at The Real Estate Investment Network and currently owns nearly 200 doors in BC and Alberta. A seven-time best-selling author, Don s expertise and passion for teaching Canadians how to create wealth through real estate are far-reaching and have made an impact on the lives of thousands. You can follow his daily thoughts on Twitter www.twitter.com/ and on Facebook at www.facebook.com/thereinman.

{{cta(‘d6f0adb4-cb2b-4816-a695-654147fc8aca’,’justifycenter’)}}