Next Level Investing
For some individuals, property investment never goes beyond more than a hobby but a considerable number go on to take their investing to the next level. Taking the decision to expand an investment portfolio is always an exciting time but it pays to be mindful of the potential pitfalls to maximise your chances of strong returns.
Robust planning is important at any stage of the investment cycle but never more so than when looking to scale a portfolio. These of course come in all shapes and sizes so it is important to decide early on the type and diversity of properties you’re looking to acquire. Investors who have previously enjoyed success with a particular niche – student lets for example – could easily be forgiven for focusing solely on that area going forward but it can prove equally lucrative to opt for a broader portfolio of assets. Either way, the usual rules of good practice apply; know your location, understand your target tenant and set guidelines on budgeting.
Any larger portfolio will naturally come with increased responsibilities and greater workload so it is important to decide whether you plan to manage the extra duties yourself or with the help of external support such as letting agents. Understanding the cost implications of both options will undoubtedly guide your decision-making.
Having in place a strong funding stream is an obvious prerequisite for expansion. Many investors who have benefited from growth in the value of their existing properties in recent times, look to remortgaging to release equity to fund their next investments.
Remortgaging can deliver significant financial benefits, allowing you to release some of the equity tied up in your property alongside securing a lower interest rate and reduced monthly repayments.
Depending on the amount of equity freed up, following this option can, in some cases, be viewed as preferable to taking out a loan, not least because having other outstanding debts may reduce your chances of being accepted for a buy-to-let mortgage on any new property.
Regardless of how you plan to fund your expansion, rigorous financial record keeping can make the difference between breaking even and more impressive returns. Variable costs in particular can fluctuate significantly in the early days of portfolio growth so it is vital to be able to have a strong overview of how your assets are performing as a whole.
Ultimately, becoming a successful, professional property investor is as much about good timing as it is planning and market knowledge. At any one time, the most successful investors have a strong handle on current and future prospects for tenant demand in the private rental market as well as projections for future house price growth.
As any investor will testify, there’s always an extenuating circumstance around the corner to challenge your strategy, but the ability to be fleet of foot over investment decisions when the market turns for the better or worse will always stand those looking to ramp up their portfolios in good stead.
Stay Ahead of the Property Market: Newsletter
Sign up today and be the first to get the latest property news, market insights and SevenCapital development updates delivered straight to your inbox, every month.