With thousands of investment opportunities cropping up in the UK each month and the lettings market seeing record growth, expanding your property portfolio this year is likely to be a highly valuable financial decision. Managing multiple properties at once is a different ballpark to being a landlord of just one home, so here are 3 things you should consider before investing in your next buy-to-let…
1. Identify your goals
While becoming a landlord is a fruitful endeavour in various ways, your long-term and short-term financial goals should be at the heart of each of your decisions. Once you’ve established what you really want from your investments, choosing properties and a demographic should be much easier. For example, is your primary goal capital appreciation? Or are you looking for a sustainable secondary stream of income? Or perhaps, a combination of both?
You may have already answered these questions when you decided on your first property purchase, and as such, every property you add to your portfolio should in some way align with your overall plans that you formed with the initial investment. For example, if you’re already letting to students, you’ll need to decipher whether it makes more financial sense to branch out, or to invest in another student-friendly property.
2. Don’t expand until you’re ready
Successful property management is all about moving at a calculated and steady pace; don’t run before you’re ready to walk. If you’re hoping to build up a stable and long-term portfolio, you’ll need to make careful decisions and be cautious of rushing into any new purchases. No investment comes without periods of turbulence, and you’ll need to be absolutely certain that you can keep abreast of these when they crop up unexpectedly. As such, it’s best to avoid cross-collateralisation, as borrowing against the value of multiple properties at once means you won’t be able to service a debt in case something does not go to plan. In this case, you may end up forced to sell multiple properties at once to pay off one loan – leaving you back at square one.
3. Evaluate the current strategy
Already owning one or more properties places you at an advantage when expanding your portfolio as you have the unique opportunity to evaluate your key metrics and find out which strategies work best. Much like businesses keep a close eye on their KPI’s, investors should regularly take stock of things like monthly rental income, return on investment, and the average length of void periods.
By treating your portfolio as a business, you can use your monthly results as objectives, or even target them as areas for improvement. This will help you find the right property while also brushing up on your skills in property management to ensure that you’re well on your way to reaching all of your financial goals.
Thinking of becoming a landlord? Contact our dedicated investment team today to start your journey.
