Building a property portfolio is an excellent way to build a long-term investment plan that will provide safety and profit in the future. In this article, we will discuss tips to help you build a property portfolio.
Clarify
There can be a lot at stake in the property business and risks are high. This is where some essential planning and research can help minimise costly mistakes when building a property portfolio. It’s important to tap into why you want to delve into this type of investment. Do you want to increase your monthly income for example, or secure funds in retirement, maybe you’re wanting to provide financial security for your children’s future? What sort of property would you like to buy? How will it be managed? Take your time to identify these goals before you even think about putting the wheels in motion.
Research
When you’re ready, there’s lots you can do during the research phase to help make the right financial decisions. You’ll need to know the market for your preferred property. What’s selling, what isn’t, are properties selling for over their asking price, or are sellers struggling to get the sale. You’ll need to be familiar with all local amenities too, so you know what type of buyer will be drawn to your property. And, what this buyer looks like. You’ll want to speak to local agencies to identify trends and look into areas that are going to provide the best level of profit. Sites like Rightmove and Zoopla can help with your general understanding of the current market.
Know Your Finances
This is one area you can’t afford to not stay on top of. Rental costs should cover mortgage and insurance costs and you want to ensure there is some level of profit to you after this. Knowing these figures like the back of your hand will also ensure that your dream of building a property portfolio will stay within reach. You’ll also need to factor all the potential unforeseen costs, as life rarely goes to plan. Ask yourself how you would deal with problems identified in the property and any natural disasters if in a flood prone area. The means must exist.
Whose Market
Whose market it is at the time you’re looking to buy will make a difference to your action plan. In a buyer’s market where demand is low, you’ll often find there are more opportunities to buy at below asking price. In a seller’s market, competition will be fierce and often buyers will be offering above and beyond the asking price. Time will also be of the essence. You may also want to consider buying at auction – whereby you will buy below market value but often these properties will require a lot of money and work before you can sell. It’s all about taking time to consider the right choice for you and your current situation.
Start Small
Building a property portfolio doesn’t mean buying all at once, as this makes no sense at all. You’ll start with one, learn and develop slowly and smartly. Only once you are receiving a steady return from property one, you can then start the clarify and research stage for property two. You’ll also need to think about how the property will be managed, often buyers will use letting agencies for this. You’ll also want to make sure that relationships with your tenants are positive and easy going. Choosing tenants should not be rushed. They have to be the right fit. Happy tenants stay for longer and are more reliable. From your side, you’ll want to ensure you respond promptly to any correspondence. Sort any maintenance issues out quickly and provide notice for any pending visits.
If you’re looking for additional ways to build your investment opportunities, click here for more helpful reads.
