Building a property portfolio can seem like a daunting task when you look at it as one big job, which is why you should break it down into smaller steps. Here’s how to manage your property portfolio with maximum results.
The First Step
Many people begin their property portfolio with a renovation project. This involves buying a rundown property at a lower price, renovating it and selling it for a profit. As you become more experienced, you may choose to hold on to a renovated property and let it out to tenants for a monthly rental fee. You can then use financial aid to buy your next property, using rental fees to fund the project, and so on.
The key is to find properties that are going to bring you the maximum income or long-term capital gain. This means researching and scrutinising every aspect of a potential investment, including location. Even if the property itself needs work, rental yields and capital appreciation will depend largely on where it is situated — nearby school access, close to transport links, convenient retail facilities in the area etc.
Another option is to buy off plan, before a development has actually been completed. This can get you exceptional savings on price and, by the time the property has been built, you will likely already benefit from some capital appreciation.
The Next Steps
Once you have compiled a small property portfolio to your name, you can afford to broaden your horizons and consider properties further afield or even overseas. You could also consider other ways of purchasing properties, such as by familiarising yourself with property auctions. This can be a lucrative way of building up investments which you can renovate as many auction properties slip under the radar of the regular market buyer. There are even auction bridging finance options available from trusted providers like Glenhawk, giving you the initial funding you need to acquire an exciting auction opportunity and turn it into a profitable investment.
Widening Your Scope
As your property portfolio continues to grow, it is a good idea to take the time to spread your investments. Buying in different areas and in different market sectors can give you more security and flexibility, as can investing in different kinds of properties. You could consider investing in student properties, professional lets or rental properties for public sector professionals like doctors, nurses and teachers.
You’ll need to consider the practicalities attached to any property you choose to invest in, including any excess fees you haven’t thought about and maintenance. If your investments are further afield or even in a foreign country, it is important that there is a caretaker or manager in place who can deal with emergencies in your absence. This will prevent you having to only choose properties that you can get to quickly.
Similarly, if you’re a landlord of a property in a different location to you, you need to make sure you’ve chosen reliable tenants. Take the time to find people who are likely to stay for an extended period of time, avoid making a mess and pay their rent on time. Landlords should conduct the relevant checks on any tenants they put into their properties.
It goes without saying that finance is a huge part of building a property portfolio. The larger your portfolio becomes, the more complex (yet flexible) your financing becomes as consequence. You’ll need to run your portfolio alongside clear business principles and strategies, including loan to value measures, cash flow projections and rental yield calculations. You’ll also need to factor in maintenance costs, which can be considerable if you are planning for a large number of properties.