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Once you've gotten a taste of real estate investing, it's natural to consider how to expand your investment portfolio. In this article, we'll cover how to approach real estate investing based on your experience, budget, and some practical considerations.


Types of Real Estate Investments You Can Consider

Real estate investments are a powerful way to generate passive income and hedge yourself against market fluctuations, as they hold their value well. While the value of rental properties tends to skyrocket during inflationary periods, minor dips in the real estate market tend to resolve faster than for other investments.

There are a number of different real estate investments you can consider, and smart rental property owners tend to develop a diversified portfolio made of different real estate property types. 

Rental Properties

When people think of real estate investing, rental property tends to be their first thought. It makes perfect sense, as well-chosen properties can generate a healthy rental income year over year. There are two types of rental real estate properties, residential and commercial, which then have their own subtypes. Residential rental properties include long-term rentals, such as apartments, and short-term rentals, such as vacation homes. Commercial rental properties can include shopping malls, office buildings, restaurants, and specialized buildings like warehouses.

Fix and Flip

Seasoned real estate investors who enjoy a challenge often find distressed real estate properties, fix them up to habitable levels, and then sell or rent them. It can create a very strong cash flow: recent data reveals that the average return for flipping houses is over 20%, with a profit of around $67,000. However, this form of real estate investing takes a lot of practice and know-how, so house flipping is generally not recommended for beginner real estate investors. 

Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a type of real estate business that owns and finances investment properties. Most are publicly traded REITs, easily found on the stock market or a real estate platform. These aren't direct real estate investments, but you can enjoy some of the profits of rental properties without actually owning real estate.

Many real estate investors will have these mutual funds as part of their portfolio because they provide a regular monthly income without the high risk. They're a good introduction to the real estate industry for beginners who don't have the funds to start investing on a larger scale. You'll generally receive monthly or quarterly distributions from the real estate developers who own the properties.


Real estate crowdfunding platforms are a great option for those who want the excitement of owning physical property but don't have the funds to buy investment property on their own. With this option, you pool your money with a real estate investment group to secure property together, which is then held in a private REIT. As real estate investments go, it is lower risk than buying commercial properties as an individual, though the dividends are also lower.  


Benefits of Investing in Real Estate

Real estate investing is an excellent way to develop strong cash flow. Some of the benefits include:

  • •  Regular passive income – While finding tenants, collecting rent, and maintaining the property does require involvement, rental property owners who work with property managers generate passive monthly income with significantly less work.

  • •  Great tax incentives – You may use several tax deductions, such as the pass-through deduction for LLCs, the depreciation deduction, and business write-offs.

  • •  A diversified portfolio – Diversification lets you protect your investments. 

  • •  Long-term stability – Real estate investing is generally safer compared to stock market investing, which is much more susceptible to fluctuations.

  • •  Building equity – Real estate appreciates over time and the equity you build can be leveraged for other real estate investments.

  • •  Various real estate investing strategies – You can find a strategy that matches your level of risk aversion.



Can You Afford Another Real Estate Investment?

Before you can consider whether or not you're ready (or want) to pursue new real estate investment opportunities, there are some minimum qualifications you need to meet. We will quickly walk you through those before highlighting your next steps.

Investment Property Loan Qualifications

When considering buying a new real estate investment, the first question should always be: Do you qualify? Some key investment property loan qualifications include:

  • •   Minimum 25% down payment – Many investment lenders have a max LTV of 80%, and that is for the highest credit score tiers.

  • •   Minimum 680 credit score – Most investment lenders require a minimum credit score of 680, but they offer better rates and terms for higher credit.


Lenders use credit score, as one of many factors, to determine a borrower’s ability to pay back a loan. LTV indicates to lenders how much skin in the game a borrower has and also serves as a safety cushion.

If your credit score is not up to par, check out our tips on improving credit. For those investors without enough cash on-hand to invest, learn more about tapping into your existing equity to build wealth.

Investors with strong credit and reserves, continue down our decision tree for more guidance on this being the right decision for you. While this decision tree is here to guide you, we always recommend consulting your financial advisor, lawyer, and real estate agent for any new investments.

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Guides for Different Types of Real Estate Investors



Investing in Your First Rental Property

The most important thing to consider as a first-time real estate investor is your financing. From a financial perspective, you need to evaluate both expected and unexpected expenses. Most of these will need to come from your own money, so you'll have to ensure you have adequate cash reserves.

Expected expenses

With any real estate transaction, there are several fees you'll need to pay.

  • •   Down Payment: For commercial real estate and rental properties, this is a 25% minimum of the property value.

  • •   Closing Cost: You will need to cover the costs of completing real estate transactions. This will include loan fees, attorney fees, appraisals, and commissions for real estate agents and real estate brokers.

  • •   Home inspection: Successful real estate investors always have the rental property inspected, even if it is not required in their state. This usually costs around $500.

  • •   Insurance: You'll need homeowners or landlord insurance for your real estate investment, and if you are starting a real estate business, you should have business insurance as well. 

  • •   Property taxes : Nearly every municipality has property taxes. They can be quite hefty, depending on your local market. Thankfully, you can often lower this by protesting revaluations of your investment property, keeping the rates down.



Unexpected expenses

A successful real estate investor always leaves money for incidentals. These costs will generally fluctuate over time, so you must build up cash reserves that will help keep your real estate asset in good repair.

Some of the unexpected expenses that can emerge include:

  • •   Maintenance and repairs: Even the best real estate investments may have issues such as pipes bursting or the heater going out. Aim to keep at least 1.5 times the monthly rent for yearly repairs. So, for example, if you charge $2,000 per month, have $3,000 set aside to cover problems. Some who have purchased older real estate will keep 50% of their rental income each month aside. 

  • •   Vacancy: Prepare to pay for your mortgage and expenses for a period of time without a tenant. Look at the vacancy rates in the local real estate market to ascertain how much you will need to keep in reserve.

  • •   Property management: This includes tenant screening, rent collection, maintenance, and resolving disputes between tenants in apartment buildings. It seems small, but things like rekeying locks after a tenant has left, paying for landscaping, and following up on delinquent tenants can eat into your budget. Those investing in real estate often find a good property manager to be a good investment, but you can also take care of this yourself or utilize property management software. 

  • •   Professional counsel: Negotiating contracts for property managers and other parties, as well as completing real estate deals and filing taxes, often require professional assistance. Expect to pay for a financial advisor, lawyer, and real estate agent when you contemplate real estate investing.



Buying a Second Investment Property

Congratulations on considering your second investment! If you’re here with us, we know your credit and cash reserves are strong. Now, let’s dive into the next round of considerations.


Every real estate market is different: you need to understand things like vacancy rates, average rents, and property taxes before you invest in real estate for a second time. This is particularly true if you are expanding into new territory or buying into a new niche, such as residential real estate.

Even if you are staying in the same area and buying the same kind of real estate assets, the market may have changed significantly since you bought your first real estate investment, so you can't assume that everything is the same as it was back then.

If you have a specific location in mind and a market you know well, then you are in a strong place. If not, geographic research and identifying a profitable market are paramount. As a starting point, we've compiled a list of the best cities to invest in real estate. 

Cash Flow

Expanding your portfolio makes sense financially if your existing property has positive cash flow. However, if your mortgage payments are higher than your rental income, there are some adjustments you can make to improve your cash flow and DSCR. It's critical that you have healthy cash reserves before taking on another property investment.


Managing an investment property is very time-consuming. Consider your availability and any property management software or automation you can put in place to make the process as seamless as possible. Also, evaluate hiring a property manager.


Do you have a lender in place? Learn more about Visio Lending's real estate investing loan programs to see if they meet your financing needs. You'll also want to explore refinancing when the local market changes and rates drop. 


Landlord insurance is critical to growing a portfolio and ensuring your investments are protected. While it's more expensive than homeowners insurance, it also includes liability insurance that will pay out if someone gets injured on your property, helping to protect you from expensive and reputation-damaging lawsuits. You'll also be covered for unexpected damages, like a fire started by a tenant. This is the bare minimum, but you should consider a more comprehensive policy, particularly if you have a very expensive real estate investment.

This is a basic overview of some of the key factors to consider as you grow your rental portfolio. Consult one of our professionals for more guidance.



Seasoned Investor Portfolio Growth

So you are considering buying an additional investment property. Whether it is your third or fifteenth, it is important to speak to your professional counsel to make the best decision.

In addition to reviewing all of the factors from the first two decision trees, you should also consider your equity and liability.


Do you have a business entity to protect your personal assets? While conventional mortgages, which are almost identical to a residential loan, can typically only be taken out in an individual's name, this opens you up to major liability should there ever be a problem with your real estate investment.

Once you've advanced in your real estate investing journey, you should consider more specialized loan products like DSCR loans, which can be secured by real estate limited partnerships or real estate investment groups.


You've recognized by now that real estate investing is pricey, and you want to reduce your upfront investment as much as possible to keep your cash flow strong.

Do you have existing equity you can tap into? If you've held your real estate assets for a while now, especially if property values have risen a lot in your local market, you may have built up significant funds that you can tap into through a cash-out refinance.

You need to have a real estate business plan in place that considers your next steps, such as when to sell properties that are consistently underperforming. You'll also want to think about pursuing other types of real estate projects, like real estate investment trusts, real estate wholesaling, or flipping houses. A good real estate investor is always thinking several steps ahead so that they can start investing in real estate markets when the time is right.

Talking to other investors throughout your journey can help you jump at good chances you may not have heard of, like online real estate platforms, to find new opportunities. 



Meet Your Financial Goals with Real Estate Investing



Where We Lend

Visio Lending offers nationwide rental lending throughout most of the United States. 



Visio Lending is more than just a lender, we’re a partner who’s invested in helping you expand your portfolio.



Learn more about who we lend to, borrower and property requirements, and our process.