Taking your first venture into property investment can be daunting. Knowing where to start and fear of making the wrong investment can hold people back and prevent them from growing their portfolios.
To build a profitable property portfolio, follow these money making tips.
Small Investments First
Before making your first investment, it is crucial to carry out thorough research. This includes doing your sums and look at your available cash flow to figure out what you can realistically afford; thinking about how far you would be willing to travel when carrying out renovations or maintenance; and looking at rental and resale prices in your chosen area to work out profit margins.
Remember: it is better to start out small and build profit slowly, than to start too big and make a loss.
Know the Market
Researching your chosen property market and location is crucial to success when building a property portfolio. If you are buying to resell, you need to be able to target the appropriate buyers, or if purchasing as a buy-to-let, properties must appeal to local renters.
For example, is the area popular with families or single professionals? Turning a house into separate flats may generate profit on paper, but if the area is within a school catchment and popular with young families, you may have difficulty selling.
Learn About Property Investment
While you can research and learn as you go, to help your venture into property be a success, turn to the experts. Get real estate advice from industry professionals about property management, investment strategies, carrying out research and property tax. Being forearmed will help you to make better investments and could boost your profits.
Know Your Cash Flow
Cash flow is the lifeblood of any business – positive cash flow fosters growth, while negative can lead to closure. When building a property portfolio, it is helpful to view it as a business. Your portfolio needs to be grown slowly and carefully, to ensure sustainability.
Before purchasing, always check your working capital. Make sure that forecasted rental income will cover mortgage repayments, that you can afford renovation work, allow for ongoing maintenance costs, and ensure you can afford the mortgage during vacant periods.
Reinvest Your Profits
When you begin to see profits, it may be tempting to put money into a savings account or carry out some improvements to your home. However, to grow your portfolio and profits, it is a good idea to reinvest. This will allow you to expand your portfolio, invest in higher quality developments and take on larger projects.
Make Low Offers
It is simple: the less you can buy a property for, the more you stand to make. With that in mind, always start with a low offer. If the seller declines, you can slowly increase your offer, depending on your budget. But if the seller accepts, buying below market value could result in a fantastic profit.
Building a property portfolio can be challenging but also very rewarding. When starting out, carry out your research, take your time and if you need to, ask for help. Remember: aim to grow your portfolio slowly and sustainably for bigger long-term profits.