Investing in property has long been seen as an excellent way to keep your money safe and to watch it grow; however, having a single property on your books has limitations.
More and more investors are now looking for ways to build up a property portfolio that gives them more significant opportunities.
Building a property portfolio is more complex than buying more houses, as it needs to be managed and thought out to avoid situations where you may have overloaded yourself.
What Is A Property Portfolio?
A property portfolio can be owned by an individual, a group or a business and refers to a selection of investment properties. This is often done through buy-to-let properties, which can offer you a monthly rental yield alongside what will hopefully be a capital gain. This can give you a significant investment return and become a full-time career for some investors.
How can you prepare for a building a property portfolio?
1. Financial Preparations
When you buy any property, you must ensure that your finances are in order, which is especially important when building a property portfolio. There can be many costs involved in the process, so you need to ensure that you have accounted for all of these and have a plan for how you will cover them.
The average property price is now around the £295,000 mark so you will need significant funds.
In addition to this, you will also need to factor in Stamp Duty tax, Income tax, letting agent fees, maintenance costs, ground rent, Capital Gains tax, mortgage payments and landlords’ insurance.
Some of this will be covered by your rental income, while other items must be set aside before you make the purchase. You will also need a plan for covering these costs if the property is left empty for any period or if you have tenants who do not pay their rent.
2. Put A Goal In Place
If you are building up a property portfolio, it is usually because there is something that you want to achieve. It would help if you spent some time looking at what your goals are for your portfolio, as this will give you a clearer idea of how to go about building it.
Consider how quickly you want to see a return on your investment, whether you are looking to boost your current income or set up a retirement fund, and identify how long you want to hold your portfolio.
This will give you an idea of how long you want your investments to be in place and whether you are hoping to make more money from the growth in the value of your property or what you can make each month.
Once you have identified these goals, you can focus on the suitable property types to help you achieve them.
3. Do Your Research
Property investment should be entered into with seriousness, especially if you want to build a portfolio, so much homework needs to be done. It can be tempting to buy what you know and stick to properties in your local area, but there are better ways to help you achieve your goals.
Spend some time looking at the best areas of the country for investment, the types of property that are in demand from renters and where you are likely to see the most significant growth in prices.
Many investors are currently looking at properties in cities such as Manchester and Liverpool as these remain affordable for investors, and yet their prices are predicted to continue to rise.
4. Take Your Time
If you aim to have a property portfolio to your name, it can be tempting to do it all at once, but the secret to success is to take your time. Start your investments with one or two properties to avoid you taking on too much.
There is a lot to learn when it comes to investing in property and being a buy-to-let landlord, and you want to avoid finding your feet when you have a whole raft of properties to look after. Once you gain some valuable knowledge and experience, you can expand your portfolio more confidently.
5. Remember to Diversify
Arguments exist for and against putting all your eggs into one basket. You should specialise in a particular property type or stay all in one area, which means you can gain tremendous knowledge in one specific thing.
Whilst this can be very useful, it can also leave you vulnerable if there are changes in that market.
Diversifying your portfolio means spreading the risk around different types of property and other spots in the UK. However, it can mean that you are also more likely to make mistakes when branching out into something you have less knowledge or experience.
It is up to you to think about the type of property you want and know about, as well as your feelings towards risk.
Cash Flow can be the undoing of many investors. Whilst you might be asset rich, you need to keep on top of whether your rental prices need to be adjusted, whether interest rates will hit your mortgage payments or whether you need to sell the property together to make sure that you have the cash in the bank that you need to keep everything running smoothly.
There are some massive advantages to having your property portfolio, but you need to ensure that it is managed correctly to make it a success.
Pure Investor, specialists in Investment Property, have some of the best tips to get your property portfolio off the ground and make it grow successfully.