Ask any property investor what they’re looking to achieve and they’ll tell you the same thing: own more property. Starting a property portfolio needn’t be a huge challenge, it’s all a matter of proper research and good investment advice.
Don’t be afraid to start your property empire like any other investment. It’s all a matter of preparation. Building a portfolio will largely be dictated by both your current finances and your financial goals.
If you’re looking for long-term returns that can be used as a retirement fund, for example, you’ll work in a different way to those looking for short-term gains.
In terms of research, concentrate on three key areas: Location, Past Performance and Demand.
Choosing Your Investment Location
Location will always be a major part of your research and should be continued throughout – especially if you’re looking to have 5+ properties.
Pick out several potential areas that are showing good growth, have excellent amenities or demonstrate exceptional potential for the future.
That last point is particularly important as emerging locations mesh well with long-term strategies, allowing you to take advantage of natural market growth. This is the bread and butter of any portfolio investment.
In terms of amenities, you’ll want to consider transport links such as nearby train stations or restaurants and bars that appeal to tenants looking for a certain lifestyle. Similarly, having well-known or large scale business nearby can attract workers that will need somewhere to live – which is where your investment can come in handy.
So, to recap, you’re looking for areas that are either established investment destinations or have the potential to become an investment hotspot.
Having a mix of both is perfectly viable as this is just another form of diversification that can help you mitigate risk and build success.
How to Build a Property Empire: Scaling Your Property Portfolio
One of the most common challenges you might face as an investor is scaling your property portfolio. Many landlords or investors have a single investment but struggle to take that to the next level. That’s where we can help.
Once you have a property or two under your belt you can start considering scaling. This is the stage where things can go wrong quickly so taking things at your own pace is vital. Remember that typically, you’ll be in this for the long-haul, so don’t try to time the market or rush for the ‘best’ deals.
Always remember that in terms of growing a portfolio, time is your most important resource. Property and yield building inherently suit a long-term strategy centered around being in the market for as long as possible. You want to spend enough time in the market to take advantage of natural growth while also maximising the returns from your yields.
At this point, you should also have your ideal holding pattern in mind. Ideally, you’ll have thought about this during the planning stage of your investment but understanding that you’re planning to hold for five, ten or even 15 years can help inform what you decide to do in the future, meaning you can adequately research beforehand.
Building a portfolio through a limited company is a method of investment management that is quickly growing in popularity. Offering a number of unique benefits that individual investors wouldn’t usually experience, a limited company can offer flexibility when building the portfolio over the long-term.
That said, if you’re looking to build a property portfolio through a limited company, try and decide this well in advance. This method of investment can offer a number of benefits but may require a slightly longer set-up time that will need to be factored into your plans.
Don’t forget to track your key metrics – is your rental income covering your mortgage payments? Are they still providing reasonable returns? Do you have the preparation in place for your next properties?
How to Build a Property Empire: Sustaining Your Property Portfolio
So you have everything you need to create a thriving portfolio. But how do you maintain it? This is the longest period of your investment journey and whether you’re holding or adding to your assets, sustaining your property portfolio is vital.
How you manage your properties is largely down to your individual circumstances. Some investors prefer to get their hands dirty and run the entire thing themselves, while others are happy to go hands-free.
Hands-on investors will typically do everything themselves, from sourcing tenants to performing maintenance. This type of management is ideal for the investor that wants full control over their investment or wants to save money that would otherwise be spent on these supporting partners.
Hands-off investment is the alternative for investors that cannot commit to full-time management of the investment or those investing from overseas. In both cases it’s unfeasible that these landlords would be able to do everything themselves, meaning working with a trusted partner is necessary.
A trusted network of partners is one of the most beneficial things an investor can have in their arsenal. Building a rapport with letting agents, property managers and even financial advisors can be incredibly useful at the start of an investment and will only carry through in the long-term.
Having a relationship with a lettings agent in particular can be useful as they can also offer local knowledge of a market. If you’re investing somewhere relatively new (or long-distance as the case may be), having an agent working with you will only supplement your research into demand research and help you understand what tenants are looking for.
How to Build a Property Empire: Selling Your Property Portfolio
The final step – selling your property portfolio – won’t necessarily be for everyone. While many investors will be looking to hand their portfolio down as an inheritance, it’s true that some investors may be looking to sell their portfolio.
It should be noted that property investment always suits a long-term strategy and selling over a short-to-medium timeframe can mean missing out on maximising returns. It’s always an option to hold on to property as long as possible, especially as the gap between supply and demand continues to grow.
If there does come a time when you’re looking to sell then your options depend largely on the size of the portfolio.
For landlords with several properties, these can typically be converted back to ‘traditional’ residential houses that can then be sold on through an estate agent or bought by another investor.
If you’re a landlord with a larger portfolio – say 10 or more – your best course of action is usually to sell to another landlord. Whether you go through your own network to a private buyer or sell via one of the many services out there is down to you.
Similarly, if you’re selling a portfolio with tenanted properties there’s other factors that should be taken into account. If a landlord is selling a tenanted property portfolio, they’ll typically do it off-market. However, you still need to consider:
- Why are you selling in the first place?
- Do you want to sell your properties together?
- Are your properties up to legislation and fully-compliant? Do they need maintenance work?
- Is the rent you’re currently charging appealing for any new buyers? Is it competitive?
- Did you buy through a limited company? If so, the sales process will be different.
