The aim of a property portfolio is to make money in such a way that the income remains safe in spite of ups and downs of the market as well as due to personal circumstances. To build your own portfolio you first have to own a property. However, for the first time buyers who cannot afford to buy property, there is a refurbishment opportunity that is offered.
Buy a rundown property at a discount and then turn that property into a smart, attractive property that can be let or sold easily to gain a profit. When you finish the renovation project, don't sell but re-mortgage and take the released equity out to apply it to the next project.
If you are not prepared for this, you can opt for the 'Buy to Let' route. This involves buying property at a discount and then letting it to others. Use the rental income to fund a new home. If you have a home, then use it to raise the funds to buy a new property. Move into the newly acquired home and sell or let the previous home. If you manage properly, you can cut down your tax payment also.
If you have a mini portfolio, options will be widened for you. You would be able to acquire deals through it. Mix your portfolio with investments in different markets and different sectors.
There are certain points that you should keep in mind:
1) Make sure that you can fund the project in worst case scenarios as well.
2) You may have to invest money in the property if the rental income does not cover all the costs like mortgage payment, insurance, service charges and maintenance.
3) Remember that frequent increases in rent means keeping your property in good condition which results in spending reasonable amount of money.
To maintain a property portfolio you need to have a dedicated team. The team consists of a funding source, a valuer, an accountant, a lawyer, an insurance advisor, a letting agent, a managing agent, and a maintenance team. You may not need all of them all the time.
The valuation of property is a kind or art and there are large margins in which a single property could fit. If your valuer put your properties at the upper end of these margins then you can certainly refinance other properties easily.
The tax system is always complex. Be sure to hire an accountant who is familiar with the property business. A lawyer is invaluable for a property portfolio. If you are caught in some legal transaction then, this comes handy.
A letting agent is necessary to find a tenant. It is important to maintain a good relationship with the tenant and a management agent is necessary for this.
A maintenance team is vital to keep the property maintained which increases its market value.
The key to build your portfolio is paying the right price for the property. Try to buy below the market price. Property auctions or distressed properties are good choices to start a portfolio. You can also try off plan deals, private deals. It is a good idea to avoid such agents to cut down the expenses.
