Spread the Risk
It is often more profitable to buy a number of properties than just one for the same outlay. This gives you more flexibility and reduces the effects from empty periods; your risks are minimised. If only one property is purchased a void period will result in no income. However, if multiple smaller units were acquired the effect of one property being unoccupied is proportional to the number of properties held and a return on your investment will still be maintained. Overall achievable rental return is likely to be significantly higher across a portfolio of several smaller properties rather than a single investment in a larger one
Generally, there is upward movement in all aspects of the housing market which makes property an excellent choice to consider for investment. Return on investing in property is a combination from rent around 5% and capital growth around 2-3% giving a potential annual ROI of 7-8% gross.
Review the rental market
Find out from local estate agents what is happening in the rental market. If tenant demand and rents are increasing, your yield will also increase.
Plan and prepare
The solid foundations of property portfolio success are often down to advanced planning and precise preparation.
Before investing you need to have your finances in place, with a long-term plan in mind. A qualified financial advisor will advise how best to fund purchases.
It’s important to identify why you’re investing in an additional property and what you want that property to achieve ie pension, monthly income, long term capital growth for future use?
It’s also essential to know when (and how) you’re intending to exit the investment so that a clear exit strategy can be prepared. Again talk to a financial advisor and tax expert before committing to portfolio growth so you can plan how to exit in the most cost-effective way.
Starting the search
Not every property makes a good rental investment to it is important to choose wisely.
Ask your agent for advice and then short-list several properties taking into consideration the following for each: location, price, potential renovation costs, suitability for the rental market, timescales before being rental ready, tenant demand, achievable rental return, potential for capital growth, plus where it will fit in with the rest of your portfolio.
A good agent knows what tenants want and need from a property, what’s in demand and which type of properties are likely to be successful for investment purposes. In fact, as risk indicators are sometimes overlooked by those searching for a purchase, an agent can tell you what’s wrong with a property as well as what’s right.
Managing your portfolio
Consider how you will manage your properties and tenants. How will you deal with maintenance issues, emergencies and tenant demands and needs?
Consider how you will keep up to date with and adhere to the increasing legislation, plus keep on top of essential anniversaries such as Gas Safety Certificates etc.
Bear in mind too that there are new financial challenges. We’re in year one of a four-year process to drop tax relief for landlords, plus an extra 3% Stamp Duty now has to be paid for each property bought for rental purposes.
Consider using a qualified Property Management Agent
By far the easiest way to manage an expanding portfolio is to engage the help of a property management agent.
Qualified and experienced agents will thoroughly vet potential tenants, find high quality tenants, troubleshoot emergencies and issues and arrange necessary maintenance. Additionally, your portfolio will adhere to all legislation and annual renewals.
Most importantly both you and your tenants will be protected and your tenants will be housed in a safe environment.
Contact Phillips George to discuss how our managed service will make managing your rental portfolio profitable and hassle free.
t: 0116 216 8178
Image courtesy of [Stuart Miles] at FreeDigitalPhotos.net