Building a property portfolio is a big financial investment and can consume a lot of your time, so it’s important that detail and care is put into your property investment strategy from the beginning whether you’re a passive or active property investor. Investing in property is about buying at the right time, knowing the market and area you’re investing in and understanding what you want from your property portfolio.
Before getting started, it’s helpful to have an idea of how much money and time you can invest into building your portfolio. With demand growing in the UK private rented sector, investing in property can be a lucrative investment strategy, especially when investing for the longer term. Building a property investment portfolio allows you the opportunity to generate a higher return on investment than you can when only investing in one property.
In order to grow your property investment portfolio sustainably, here are seven tips to help you build a sustainable portfolio and help you create a plan to put in place.
Identify short and long-term goals
As building a property investment portfolio is a significant venture, it’s important to identify what your top goal is for your property portfolio and take the time to consider both short and long-term goals. Whether building nest eggs, supporting university degrees, funding retirements or financing holidays, your financial aims will determine what type of property investments you should prioritise.
Additionally, having a clear idea if capital growth or rental returns or a mix of both is your top focus will help you figure out what investments you should be looking at investing in. The most successful property investment typically includes both capital gains and high rental yields, so investments that are forecast to bring both could be lucrative investments to start with.
Do your research
It’s useful to do research in a variety of areas in order to make the most out of any property investment. With any addition to your property portfolio, it will be important to do your own market research and increase your knowledge within the property investment industry. Below are a few of the most important areas to research when building a property investment portfolio.
- It’s helpful to have a good understanding of the local demand and market where you’re interested in investing in. Is the area predicted to see house price growth and strong rental yields? Is the population expected to rise and are there regeneration, new developments and growth expected to come to the city and specific area?
- Having knowledge in what kinds of properties work best for HMOs, single lets or flips can help you decide which exit strategy is best for you and a specific property you’re interested in investing in.
- Learning about the theory of the property cycle can be a pivotal part of your property investment strategy. The length of a full cycle is around 18 years, and each cycle is divided into four stages – the recovery phase, mid-cycle dip, explosive phase and recession phase.
- Look into what landlords are responsible for and what services property management companies offer. This can help you decide whether you want to be a hands-on or hands-off investor.
- Accurately research the numbers behind property deals as these can often be confusing and misleading. PropertyMenu uses technology to bring transparency, professionalism and credibility to property investment deals, enabling everyone to make better returns.
Make lower offers
To have a successful property portfolio, purchasing properties at lower prices can help you make higher returns and help you reach your investment goals. Finding the right time to invest in property where you can capitalise on lower prices can be especially beneficial. Investing in properties that leave you room to add value can be increasingly lucrative so you won’t be only relying on the increase in house prices to make a profit.
Start small and grow carefully
It’s advised to start small in order to help you successfully build a property investment portfolio sustainably. Don’t bite off more than you can chew early on. Building a sustainable property investment takes time, care and attention. Choose investments wisely and put a lot of thought into property investment decisions.
PropertyMenu’s online platform helps with this by matching potential investors to property deals across the UK. We believe knowledge is power and that’s why we’ve put our heart and soul into developing a platform that gives you clarity on every aspect of the deal, removing the uncertainty that so often surrounds property deals.
Treat your property investment portfolio as a business. Keep an eye on your cashflow and other financial statistics, like incoming and outgoings. Make sure you’re making enough income to cover mortgage repayments and other additional costs, such as repair and maintenance. Consider what are the most important data and statistics to measure in order to track your path to reaching your property investment goals.
If you don’t keep track of your finances, you won’t be able to effectively expand your property investment portfolio. As with any investment, it’s important to have data to measure your successes and failures. This can help you grow your portfolio and help you learn from your investments moving forward.
Diversify your property investment portfolio
As with any investment, it can be helpful to diversify your property investments as this can minimise risk. You can diversify your property portfolio by investing in different types of property assets in varying geographic locations.
If one type of investment performs poorly for you, then you can rely on your other property investments that are seeing better results. This could help you have more success in the future as you can see what investments perform the best for you.
Know your exit strategy
Take the time to consider what your ideal end result would be for your property investment portfolio. This is ideal to do from the outset. Throughout each phase of your property investment portfolio, make sure you’re considering your exit strategy. And evaluate your short and long-term goals along the way to ensure you’re on the right track to achieving them.
What steps do you believe are necessary when building a property investment portfolio in the UK? Check out PropertyMenu’s Deal Calculator to help you assess property investment deals, make more informed decisions and take your property portfolio to the next level.