There’s a reason people use the phrase “as safe as houses”, as property can be one of the most lucrative investment options available. In this article we’re offering tips on how to start, build and maximise the value of your property portfolio.
Hands on or hands off?
The best place to start is by deciding what is the objective of your property investment? It could be that you want to hire an estate agent to manage the properties and rental payments on your behalf, or maybe you’d like to take a hands-on approach, which saves on agency fees but requires a lot of extra work.
Once you’ve decided on the approach, it’s time to choose whether you’re looking to boost your immediate income through rent payments or benefit from long-term increases in property value. It could very well be both, which is quite typical, although going for one over the other makes a difference. For instance, buying a property that already has tenants means instant income but limited opportunity for increasing the rent, whereas purchasing an empty property that’s seen better days and renovating it takes time and effort but can bring the possibility of great returns.
Start with a single property
If you’re new to property investment and have the funds available, it can be tempting to dive in headfirst and buy two or more in one go. However, this can be overwhelming and potentially costly if problems arise or upgrades are required, so resist the temptation and start with just the one property for now.
It’s also important to decide a maximum distance for your property. If you want to keep on top of maintenance or carry out scheduled landlord checks in person, it’s best to find somewhere that isn’t too far from your own home.
Do plenty of research
Never judge a property simply by its immediate appearance and listing description, as there are many other factors involved in the selection process. These include everything from the behaviour of the existing tenants and neighbours to the condition of the house’s infrastructure and any potential problems that may arise in the near future.
The more obvious issues are damp, subsidence, poor electrics and plumbing, old windows and doors, the risk of flooding in the area, and anything else that’s likely to cost you money. Then there are the far more subtle problems, such as a property that’s difficult to heat, poor energy efficiency, local noise pollution, loose roof tiles, the presence of Japanese knotweed, and signs of current or previous infestation of vermin or other pests.
You then have factors such as the local property ceiling price, which is the maximum any property of a similar size and age in that area has sold for in recent years. Buyer demand is another crucial consideration, such as three-bedroom properties potentially being in much higher demand than those with only two.
Your research should take numerous routes, as trusting just the one source could result in key information being omitted. Talk to the estate agent, a surveyor and neighbours, as well as searching for the street or neighbourhood on Google, your local newspaper website and social media. Investing time into a little detective work can save you a lot of money and stress in the long run.
Outsource maintenance tasks wisely
If you’re looking after the property yourself, it will be your responsibility to organise repairs, replacements and upgrades as required. This could be anything from a fridge or washing machine to new doors and windows, so many of the tasks will have to be carried out by a professional.
When choosing a tradesperson or contractor, such as a plumber, joiner, electrician, roofer, painter/decorator and so on, remember that cheap doesn’t necessarily mean value for money. By getting multiple quotations and checking reviews on websites like Trustpilot, you can be certain that the person or business you hire will do the job well the first time around.
Stay on top of your finances
It can be easy to lose track of the profitability of a property, especially when outgoings such as maintenance fees, energy bills, interest rates and the general cost of living are on the rise. That’s why it’s crucial to stay on top of your finances and regularly make sure that your rental income is still providing a reasonable return on investment.
Other factors that need to be considered are whether you could continue paying the mortgage on the property if there were an emergency, disaster or unexpected event such as a fire, criminal damage or simply a tenant moving out. There are of course ways to minimise these risks – smoke detectors, intruder alarms, vetting tenants and so on.
Build your property portfolio with LegacyScore
LegacyScore allows you to view all of your properties in one place, connect any mortgages through open banking, receive a free valuation and see your equity vs debt ratio. This ratio will help you identify if you can afford further investments and how much capital you have in one property that you could invest in another. Sign up today for your free LegacyScore account.