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What is the Key to Sustainable Property Portfolio Growth?

What is the Key to Sustainable Property Portfolio Growth?

If you have invested in property why stop at just one? Often, the original motivation behind becoming a buy to let investor is to gain more independence and control over your lifestyle.

However, there can be the temptation to then take things further, and purchase more properties, growing a property portfolio.

As a financial decision, it can be highly valuable, but only if you go about growing your portfolio in a way that is sustainable.

This requires strategic thinking because, essentially, you are starting and growing a business venture, and at a scale that is different from investing in a single property.

 

How Should You Start?

The first thing to do is to identify your objectives. Are your financial aims capital appreciation, or to gain a regular, sustainable rental income?

Many investors growing a portfolio combine both these elements.

 

Your end goal is important because it will define the nature of the property portfolio you will build

 

Start small. You do not need to build a portfolio with multiple properties from the get-go. Growing a sustainable property portfolio should mean that you build it steadily, in a way that keeps it manageable.

In line with this, keep your initial offers low and avoid bidding wars. The worst that can happen if you offer below the asking price is that you find yourself turned down.

Remember also, that property prices, and the amount of available stock on the market, varies from area to area.

 

What are Your KPIs?

Growing a property portfolio is a business, so you should have key performance indicators (KPIs) around how it is performing.

There will be vital metrics you must keep track of, including:

  • Whether your rental income covers your mortgage and other outgoings
  • What you have in place to cover periods when your properties are vacant

 

As with other businesses, cash flow is your lifeblood.

 

Your Tenants are Your Customers

Tenants are a crucial component in your property portfolio. They are the paying customers your business depends on.

This relationship has a business side, which means you must choose the right tenant. However, to maximise your tenancy lengths to avoid having periods of vacancy, you must make sure your tenants are satisfied and also provide good customer service to them.

 

Learn to Walk Before You Run

The property market can be volatile, and with turbulent political and economic circumstances engulfing the UK, it makes sense to take things slowly.

Keep an eye on what you owe and make sure you manage your debt.

 

There might be a temptation to grow faster by borrowing against the value of multiple properties at once so resist it

 

The risk is, that if you find you have a debt you cannot pay, you might then end up having to sell multiple properties just to settle it.

 

What is Your Way Out?

Should you have an exit strategy as your ultimate objective?

You might want a sustainable retirement income, or a means of liquidating your investments.

Keep whatever your ultimate objective is in mind when you devise your ongoing strategy to grow your property portfolio.

 

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