Investing your wealth in property can be highly rewarding if you manage your portfolio in the right way. You have to sustain an efficient workflow by organising your property portfolio as well as developing ways to diversify — after all, the objective of an investment is to make a profit. This article outlines how to maintain a healthy and profitable portfolio to increase those much-wanted margins!
Thoroughly Research Each Property
Purchasing a plethora of properties does not necessarily result in a sustainable portfolio. You could be dealing with a number of property problems and, as a result, unnecessarily increasing your workload if you’re not thoroughly researching each investment.
Refer to this mini checklist and ask yourself these important questions:
- What is the average value of other properties in the area?
- Who is your target customer?
- How much is the stamp duty?
Budget Appropriately for Each Purchase
You have to budget accordingly for each new investment — aside from the price of the property itself. Creating a list of potential expenses can help you efficiently organise your finances. Legal fees, utility bills, hiring contractors and purchasing materials can significantly add up and leave you dipping into your profit margin if you don’t take steps to account for them in advance. This can help you put a contingency plan in place in case your funds exceed your budget.
You’ll also want to calculate the rental yield or work out the potential ROI (Return on Investment) you’ll receive if you decide to sell the property.
If you’re struggling to organise your finances at this stage, you may consider hiring a professional who can help, leaving you to play to your strengths, such as overseeing renovation work to be completed on a property.
Consider All Available Loan Options
If you need to take out a loan to raise finances for a property, it’s important to consider your available options:
- Bridging loan: Use this loan to purchase a new property while waiting for other funds to come through.
- Residential mortgage: This is an ideal option for when you want to live in the property you’re developing or want to resell it.
- Buy-to-let mortgage: You’ll need a buy-to-let mortgage if you wish to rent out your property after completing its development.
- Commercial mortgage: This covers properties bought for business purposes, such as shops or offices.
- Unsecured loan: Be sure to shop around for the best rate if you need to pick up a personal loan.
- Secured loan: If you need to borrow a large sum of money, you could secure a loan against your home. However, the risks are high, so you need to ensure you can keep up with the repayments.
Expand Your Portfolio
A profitable portfolio suggests a healthy collection of properties that consistently generate money. As with most investments, diversifying your investment is an effective way of protecting your capital and maintaining a healthy financial influx.
The ultimate objective for a property investor seeking long-term security should be a portfolio containing a diverse range of properties, from residential (flats, houses and Houses in Multiple Occupation (HMOs)) to commercial (warehouses, shops, offices etc).
Keep Your Portfolio Organised
Bad habits can prevent you from owning a successful portfolio. If you get into the habit of being unorganised, it will not only increase your workload when it comes to managing your portfolio, but it can also be detrimental to your finances.
Whether you’re handling a single house or several properties, you must maintain a streamlined workflow. A lack of order and poor management can result in damaging admin errors that could cause you costly delays.
To streamline your workflow, you should invest in a comprehensive property management software. An effective piece of software should do the following:
- Track your receipts and expenses
- Calculate and distribute payments and funds
- Manage contractor jobs and redistribute service charges to all tenants
- Integrate with your electronic banking facility
- Schedule reminders
- Create and link documents to various accounting functions
The steps for maintaining a profitable portfolio are quite simple: do your research, budget accordingly, consider your financial options, expand your portfolio, and, most importantly, stay organised. If you’re just starting as an investor, it can be tempting to go big to win big, but it’s important to take things slow and invest gradually. Practice will eventually make perfect, and if you follow the above points from the time you make your first investment, you’ll develop a property investment venture that is profitable over the long term.
