Background
Working lives have changed and fewer employees can rely on a job for life or a pension. Add to this a period of volatility in the markets and a loss of faith in financial services, and it’s easy to understand why so many people are pinning their pension hopes on property.
Acquiring and managing one property can be hard enough, but when your venture grows into a portfolio of properties, you need to be on the ball at all times and plan every detail carefully to maximise your chances of success.
Where to Begin
Many people begin with a renovation project. They might buy a run-down property at a discount, do it up and sell it at a profit, which they can then invest in the next project. As the developer becomes more experienced, they might keep one of the properties they’ve renovated and let it. They then remortgage to buy their next property, using the rent to fund the project, and so on. The same principles apply. The aim is to add value to any house or flat so that it provides both an income and long-term capital appreciation. As with any property purchase, ‘location, location, location’ are still the watch-words. Even if the property itself needs work, the rental yields and capital appreciation will depend on it being in the right place, close to transport, schools and shops.
There are companies which specialise in investing in property on behalf of members of the public. These can be a good option for people who don’t wish to do it themselves, but thorough research into their suitability is advised. Remember, if it seems too good to be true, it probably is! Read our guide on becoming a property developer for top tips on how to maximise your chances of success if you’re considering a career in property development.
Further Steps
Another smart way of tapping into the market is to buy off-plan, before a development is even built. The benefits are that there are some exceptionally good discounts to be had. Additionally, by the time the property is built, it is likely that there would have been some capital appreciation already. Consult experts on how to buy a property off-plan for more information and advice on the subject.
Once you have a mini-portfolio and a positive cash position, your options widen, and you can consider properties further on the ladder or even abroad. Seasoned investors purchase properties when they are in less demand. This can be a lucrative way of building up investments as many properties are less appealing to the regular market: they might need a fair bit of work.
As the portfolio builds, it is wise to try and spread the investments. For example, buy in different areas. You might consider investing in student properties, professional/company lets, or rental property to public sector professionals, such as lawyers, doctors’ accountants etc.
Practicalities
On a practical note, for all your properties, it is important that there is a caretaker or building manager on hand to deal with emergencies. Likewise, absentee landlords need reliable tenants, ones who will stay for a long time and pay the rent on time. Letting agents will conduct checks into any tenants they put into a property.
Be aware that it is not advisable to rely entirely on bank references. Past landlords will have the best insights into a tenant’s behaviour and reliability. Always rely on the expertise of good property managers. Palydom is available, contact us today.
Finance
The larger the portfolio, the more complex the financing becomes, although, ironically, you’ll have more flexibility. It will be necessary to run the portfolio along sound business principles. Finance strategies need to be tailored across the property portfolio. Banks have a number of special loan and mortgage accounts which may be appropriate. Our Nigerian experience when it comes to mortgage loan however is not a palatable one. But, at Palydom, we have contacts of sources for well-designed and very simplified mortgage arrangements.
It is also important to factor in maintenance costs, which can be considerable across a number of properties. It is worth seeking professional book-keeping and accountancy advice, particularly in the initial stages of setting up the business.
Conclusion
Do it right. Work with professionals.
Contact Palydom now or email us at info@palydom.com, for a FREE, No Obligation consultation regarding any of your property related issues or requirements.