So here it is, six things to bear in mind when building a propety portfolio:
1. Get your goals in order:
The first thing with any investment is to think about financial goals. Are you interested in capital appreciation? Maybe you want to invest in property for an ongoing sustainable income? Or, maybe its a combination of both.
The way you answer these will govern how you get on the first rung on the property ladder. Get your goals in order to begin with and everything else will fall in to place.
2. Start simple:
We would never advise starting your journey up the property ladder on multiple properties. Try starting small and get the one property running properly and sustainably.
Make sure your first investment is carefully chosen. Maybe you’d like a property close to your home base so you can resolve any maintenance issues quickly? Maybe you’re comfortable trusting your property to a third party like Arch Living? Choose what best suits you…
3. Make sure you’re on top of your cashflow:
Don’t be worried about offering lower than the asking price – the worst case scenario is you’re turned down, and remember that WILL happen at some part of your journey.
4. Remember your tenants:
Your tenants are the most important part of your property investment, so don’t forget them in order to make a fast buck! You need to make sure your tenants are in a good place, both in order to keep tenancy lengths and make sure the property is occupied for sustainable periods.
However, you also need to keep on top of the business side of the relationship, and that begins with choosing the right tenant.
5. Climb with caution:
Don’t run before you can walk. Climb the ladder with caution to avoid an untimely fall. There is a range of indicators suggesting medium-term volatility in both the property market and the economy more generally, and you need to keep abreast of these.
Additionally keep your eye on your debt level as you climb the ladder into multiple properties and borrowing against the value of multiple properties at once. If the worst happens and you can’t service a debt, cross-collateralisation can mean that you’re forced to sell multiple properties in order to pay off just one loan.
6. Know how you’re going to get out!
This is where we go back to the beginning and remind ourselves to get our goals in order. What’s the best end game result for your property portfolio strategy? Are you searching for something to retire on? Are you thinking about liquidising your investments at some point in the future?
By knowing how you’re going to get out of the game you can help to ensure that you make sensible investment decisions throughout.
