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Growing a property portfolio

Growing a property portfolio doesn’t come easy. But when done well, it provides a healthy income and pension pot.

Before you start investing, there is plenty to consider; such as how much to invest, the length of investment and the type of property portfolio you wish to grow.

So taking this into account, we have compiled a guide to help.

Factors to consider when growing a property portfolio

Our guide walks through some key aspects to consider before you start investing in your rental portfolio.

Growing a property portfolio

The length of investment and long-term objective

Establishing the length of your investment and your long-term objective is critical. Is it part of your pension plan or are you investing to generate income, or is it a combination of both?

With extra stamp duty and any improvements or extensions, the cost of buying a rental property isn’t cheap. Therefore, it is important to work out your overall expenditure to determine how long it takes to recover the initial outlay; this could be three, five or ten years.

How much you are willing to invest

Calculating how much capital you are prepared to invest will have a bearing on the level of return. The more capital investment the higher return. But remember, with this comes higher the risk. To determine how much you are willing to invest, speak with a mortgage advisor specialising in buy-to-let lending. Seek out the best available products and consider how you balance the amount of return versus risk.

The type of landlord you want to be

You might decide to manage your rental properties yourself. If so, consider looking for buy-to-lets close to where you live. Being nearby will make it easier to do viewings, inventories and inspections, sign up tenants, and deal with repairs/maintenance issues.

Alternatively, you may prefer to use a lettings agent to deal with property management. If so, you can consider buying further afield, thus finding better deals / rental yields.

It is worth bearing in mind that over recent years, there has been a tsunami of legislation in the rental sector. An expert letting agent, who is a member of ARLA Propertymark, will help navigate you through this. Alternatively, if you decide to go it alone, make sure you keep on top of compliance to avoid heavy fines.

To help decide the type of landlord you want to be, check out John German’s Guide to Self-Managing Your Rental Property.

How to protect your investment from changes in rental returns, market adjustments or personal circumstances

Building a diverse property portfolio is a great way to protect yourself and your finances from fluctuations in the market as well as changes to taxes, licencing and legislation.

Consider diversifying your portfolio in terms of the location, value and property types. Also, think about your target renters and what they want from a property. This can vary from a long-term family let, house of multiple occupation or even a short-term holiday let. 
By diversifying your portfolio, you are spreading the risks and giving yourself more options if or when you need to liquidate assets and raise capital.

Residential property investment isn’t the only way to make money

Investing in both the residential and commercial sector is a sensible way to strengthen and diversify your portfolio. 
Keeping abreast of current property investment trends is crucial when investing in the commercial sector. The high street is constantly evolving. As an example, in a post-Covid world, large open plan office spaces are in less demand whereas small units for fledgeling businesses are increasing in popularity.

We hope you found this guide useful. For more tailored advice, get in touch with the lettings team at John German.

 

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Date Posted

February 3, 2021

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Author

Katy Storer

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