Owning multiple rental properties is a great way to make solid, consistent income. And naturally, the more properties you buy, the more you stand to make. But where do you draw the line? What's the maximum number of properties you should have in your portfolio at any given time? Unfortunately, there's no hard-and-fast number here. There are, however, some questions you can ask yourself that will point you in the right direction.
Are you wondering what your capacity should be as a rental investor? Answer these four questions.
1. How much do you want to make?
If you're not making the cash you want from your rentals, adding another property could help. Do the math, and figure out how many additional properties you'd need to produce the income you're shooting for. Then, answer the following questions to see if taking those new properties on is possible or wise.
2. How much time do you have for your business?
More properties will mean more work, so sit down and determine how much time you have to devote to your rental business and go backward from there. Is there room in the schedule for an additional property or two? If you're still juggling a nine-to-five or have familial obligations, make sure to consider these, too.
3. How involved do you want to be?
If you plan to handle all repairs and maintenance requests, manage the business side of things, and market and prep the properties yourself, each property is going to take up some serious time. If you're willing to hire a property manager or another type of assistance, you may be able to take on more. Just remember to account for the costs of these additional services when doing your calculations.
4. What's your goal as an investor?
Are you trying to build up a flush retirement for 20 years down the road, or are you looking for a passive way to earn income while traveling now? With the former, buying more properties (and putting in more work) today could definitely be a smart move. If you're looking for a more hands-off way to earn income, though, taking on more rentals will only work if you're willing and able to hire some help.
The Millionacres bottom line
Determining your capacity as an investor is highly personal. Before deciding to take on additional properties, make sure you have a good handle on your goals, availability, and budget. Knowing these can help guide you toward the right decision. And don't forget: If you're not hitting your income goal, raising the rent is always an option, too.