Property investment is, without a doubt, one of the best ways to grow your income and achieve better financial stability. More and more people around the world are opening their eyes to the potential that buy to let offers, with some investors opting to build a wider portfolio of properties. If you’ve been thinking about creating a property portfolio of your own, hopefully, these three tips will help you get started and increase your chances of success.
1 Think About Your Long Term Goals
The first step in developing a lucrative property portfolio is to think about what you want to gain from buy to let investment in the long-term. You might think the answer to this is pretty obvious – of course, the primary motivation for investing is to make money. When you feel a little deeper, however, you’re able to make more accurate decisions and invest in a way that will benefit you in the long run. For example, many people choose to build a property portfolio as a way to secure better financial stability for themselves when they retire. In contrast, other people may decide to build a property portfolio to save money for a significant life event such as a wedding or to save for their child’s future. The reason it’s essential to consider your goals is that this will dictate the kind of exit strategy you will create for your investment.
If you chose to invest in buy to let for retirement purposes, your exit strategy would focus on keeping your properties for as long as possible and then selling them at a time when capital growth is at it’s highest. With this, capital growth would be your primary focus. Whereas, if you were building a property portfolio to save for shorter-term goals, rental yields may be more relevant to you as this is a quicker way to build a sizeable income. Of course, you would still be exiting your investment at a time when capital appreciation was high so that you don’t miss out on possible growth returns.
2 Invest Wisely
While investing in property can certainly be a significant venture with some definite potential returns, it’s crucial to invest wisely to ensure you’re finding the best opportunities possible. When searching for buy to let opportunities to add to your portfolio, you should focus on the location of the property and the property type itself. Different locations will offer different levels of potential in terms of rental returns and capital growth. In the UK, London is no longer a reliable choice for investment due to low yields, and some of the worst predicted growth rates in the country. Cities up North like Liverpool are known to offer investors much more attractive rental yields of up to 10% in the right postcode.
RWinvest is a property company with offices based in Liverpool. This company looked at house price growth predictions for the UK and found that the North West, home to Liverpool and Manchester, will see the highest growth of 24% by 2024. Not only this, but properties in certain areas may be more affordable than in others, which is especially vital when building a portfolio. With an average property price of £978,436 in London according to Zoopla and an average of £178,733 in Liverpool, investors could build a portfolio more quickly with multiple properties in Liverpool for the price of just one in London.
3 Diversify Your Investments
Diversification is one of the most important rules for building an investment portfolio. With any investment, even buy to let, there is always a level of risk that you need to be aware of. Diversifying your portfolio is a great tip as it spreads this risk across different assets, which in the case of a buy to let portfolio would be different investment types in different locations. You may have found out that a specific city or area offers the best possible return on investment, which is excellent, but rather than buying a bunch of properties in one postcode, consider exploring the city further for some diversification. In Manchester, in the UK, for instance, popular buy to let areas include Salford Quays, which attracts a lot of young professionals and offers high rental yields. However, other parts of the city, such as the city center, are also desirable to buy to let spots which could benefit your investment.
You should also find additional cities with high-performing property markets as this means that if the property market in one city were to decline in some way, you’d still receive high returns from your other investments. At the same time, you wait for the market to recover. Rather than buying only one type of property, such as a residential apartment, you should also make your portfolio more diverse by investing in student properties, too. This way, you’re attracting a different tenant type and catering to different rental markets.