There is a difference between owning a building and owning a business. If you’ve invested in multifamily properties and want to develop a thriving business, you need to think strategically about your income-producing assets. This becomes even more important when you are looking to scale your portfolio.
If you’ve acquired a new property, are looking to buy more, or haven’t ever had a critical assessment of your current properties, you need to consider taking your portfolio through a SWOT analysis.
What is a SWOT analysis?
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. You’ll hear it used a lot in a business setting, especially in the areas of project management and investing. The SWOT analysis is a strategy-building tool that involves critically thinking about those four areas and determining what they are for your business. Or in this case, for your multifamily property portfolio.
Mind Tools writes, “What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well-placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.”
In other words, it’s an excellent way to develop a plan to scale your portfolio in the most beneficial ways possible. Let’s look at some of the areas to explore during a SWOT analysis of your property portfolio.
Strengths
When examining the strengths, you’ll want to think about what’s working with your current investments. Are you in an up-and-coming neighborhood? Is your building in great shape? Do you have a good reputation within the community?
Knowing what your strengths are can help you capitalize on them for future growth.
Questions to ask yourself:
- What does your property do better than any other in the area?
- Do you see opportunities to add value to your property or to the community?
- Can you find readily available and cost-effective resources?
Weaknesses
No portfolio is perfect. So where are the weaknesses in yours? Maybe you don’t have a great management team in place. Or you aren’t organized when it comes to record keeping. Or the neighborhood you are currently in is declining along with rental prices. Perhaps you are struggling with structural issues.
It’s important to be objective about your weaknesses. After all, you can’t fix them if you don’t acknowledge they are there in the first place.
Question to ask yourself:
- What is the biggest problem you face on a daily basis concerning your properties?
- Are there gaps in leadership or motivational problems?
- Is your property poised for resilience?
Opportunities
Once you know your strengths and weaknesses, it’s a lot easier to determine where there are opportunities for growth. That might include implementing new marketing strategies or making improvements to your properties. It may be finding areas where you can reduce expenses and increase revenue. It could even be knowing what industries are growing in your area and likely to bring in more potential renters.
The goal is to find ways to use your strengths to mitigate your weaknesses.
Questions to ask yourself:
- What trends are happening in your area that could benefit your current or future properties?
- Can you positively shift the presentation and perception of your property?
- Can you improve energy efficiency and implement other green strategies?
Threats
So what’s stopping you? These are the threats that you need to identify and overcome to maximize your portfolio’s potential. There may be regulatory changes that could threaten your investments. Or higher risks associated with new financing. Maybe a saturated rental market is holding you back.
Knowing what the threats are will help you make plans and avoid potential damage.
Questions to ask yourself:
- What is standing in the way of you growing your property portfolio?
- Can you meet the demands of shifting consumer tastes and changing social patterns and lifestyles?
How SWOT can help you scale
Once you’ve identified the strengths, weaknesses, opportunities, and threats within your multifamily property portfolio, you’ll have the information that you need to plan how to scale your business.
The key to a good SWOT analysis, though, is that it is impartial. It’s hard to be impartial about something you’ve worked so hard to build, so try to step back and take the emotions out of the process. Some people find it much easier to have a mentor go through their SWOT analysis with them. Not only will they be able to offer impartial advice, but they may also be able to see your portfolio from angles you hadn’t considered before.
The SWOT analysis can give you a blueprint about how to move forward with your investments. You will be able to identify investment opportunities that can build a stronger portfolio. You’ll also know what areas of your business need help and be able to invest your time and energy in building them up.
A good SWOT analysis should help you focus your efforts and know what you need to do in the future to maximize your growth potential.
Get a free consultation on your multifamily property portfolio
It takes a lot of time and hard work to start investing in multifamily properties. Collaboration with a mentor can help you take your portfolio and business to the next level. Get a free consultation to learn more about how our SWOT analysis can help you create a solid foundation for future growth and portfolio expansion.
Learn more:
Build a Multifamily Portfolio: 7 Key Metrics for Success
Putting the Sizzle Back Into Your Rental Units
Investing in Real Estate? Make Multifamily Your First Priority
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