How to Expand Your Property Portfolio
It’s important for landlords looking to expand their property portfolios to be aware of the issues that this can involve, and to take the right steps to ensure their expansion is a success. We’ll start by looking at some of the questions you should ask yourself before taking the plunge:
- First, consider whether you have the means to buy – if you lack capital, then can you secure a buy-to-let mortgage?
- Could you gain by joining a local landlord’s association?
- Would you benefit from bringing onboard professionals to assist you – either in the form of a rental agent, or in the form of an accountant or lawyer to assist with the financial and legal aspects. As well as saving time, working with professionals can help ensure your properties are managed in a legally compliant manner.
- Are your expansion aims aligned with the broader market conditions, and potential changes to property legislation: Are values moving in the right direction, and how about rental prices vs. interest rates; is a stamp duty hike imminent?
Identifying Your Financial Goals
It can be useful to define your financial goals more clearly. Are your ambitions centred around short-term profit, or long-term gains? If you’re aiming to start making a healthy month-on-month income from your new property, then the rental yield may be of most concern to you. On the other hand, if you’re investing to create a long-term nest egg for your retirement, then the potential for capital gains may be of greater interest.
You should think about your property investments as a part of your wider financial plans, and it may be helpful to seek professional advice from a financial advisor.
Are You Willing to Renovate a Property?
If capital appreciation is high on your wish list, then a renovation project may appeal. A property that requires work may well be available at a knock-down rate, and could (potentially) be worth more than the sum of the purchase price and renovation costs, once the work is done.
The same can be said of properties that can be extended, or split into multiple units. Often, the best returns from projects like these are achieved by landlords who have the ‘handy’ skills needed to complete much of the work themselves.
Properties that need renovation are often auctioned, while local estate agents occasionally have useful leads on older, poorly maintained properties in the area; professional networking can be an excellent way to learn of opportunities early.
Buyers who aren’t willing to renovate may be more attracted to the idea of buying an off-plan property. Again, there’s often an opportunity for a fast rise in value, and new-builds have a good reputation for being low maintenance (the 10-year warranties can be an attractive safety net for risk-averse investors).
Which Properties to Buy
It’s likely that you already know the area you’ll be buying in, and roughly how much you have to spend, so it’s time to start focusing on the finer details of individual properties – and looking at which will deliver the best ROI. Here are 9 points to consider when weighing one investment property against another.
- What yield will the property deliver? Most landlords have a target yield in mind, and use that as a yardstick to gauge potential investment properties by.
- Is the property ready to let, or does it require work – if so, what are the likely costs?
- Will the property be likely to require expensive maintenance in the future?
- Is the property energy efficient, and if not, what work needs to be done to make it so?
- Are you buying a leasehold or freehold?
- In the case of leasehold properties, what is the length of the lease, and how high is the renewal cost?
- Are you expected to pay service charges or similar fees?
- How many times has the property changed hands – and how long has it belonged to the current owner?
- Is property of this kind in demand in the area? Trying to let a large, single-family home in a street that’s only popular with students could be challenging, so always think of your ‘target market’.