What you should do
When managing your portfolio, you should:
- Set goals and be clear about what you want to achieve. Think about why you are investing in property.
- Do your homework on local agents. Make sure you have the best in the business and that they have a strong property management department.
- Contextualise every property you are considering buying with a critical eye. Look at the area and analyse the type of person who would want to live there. For example, if you’re next to a hospital then you might want to buy a two bedroom, two bathroom flat for two nurses sharing. Or, if you’re investing in a regeneration area, there may be more demand for one-bedroom flats.
- Create instant value for each property you buy – either by purchasing a property that needs work where immediate value can be added, buying below market price at auction or buying off-plan at a discount.
- Research independent surveys on property and rental values to assess likely capital growth - different types of property will increase in value at different rates.
- Put advice from estate agents into context as they will have their own agenda and so may not give impartial advice.
- Always have a contingency fund in case tenants don’t pay rent, the property is empty for a period of time or needs refurbishment. There will always be unexpected expenses.
- Keep your eye on the marketplace and the competition. Learn rental figures from a sales point of view, and remember that agents may have 7 or 8 properties the same as yours. Learn what will make your property the most desirable to tenants.
- Spread your property portfolio across regions and even countries when choosing properties. Diversifying across geographic areas mitigates risk if one area goes into decline. In this way investments can subsidise each other.
- Treat your portfolio as a business. Even if rental income is less than mortgage payments, capital growth on the property still means you may be making money. You will also be making a return on the value of the whole property rather than just the amount you invested as a deposit. Always make sure you manage your cash flow.
- Plan an exit strategy as with any business. A profitable exit will require some long term planning.