You probably didn’t intend for it to happen. You had a well-paid, comfortable job, before it dawned on you that you could no longer rely on that income source. Things were becoming ever more unsustainable. You began thinking long-term, about what investment structure would work best for you. And you turned to property.
This isn’t an uncommon path, particularly in recent times.
Over the past decade, more people than ever are turning to property. They understand that, with the right approach, real estate can prove to be a lucrative, worthwhile investment.
Managing a single property is taxing enough. At the outset, you must accustom yourself to the nuances of investment property, their management and how best to manage your own time. You started with one property, then two – then it mushroomed. You’re now finding it increasingly difficult to manage your property portfolio.
Managing property is a complex task, something that requires you to stay ahead. There is no easy solution, but there are steps you can take to streamline the management of your real estate portfolio. Here, we offer some clear advice to help you along the way.
Starting your real estate portfolio
Managing a real estate portfolio doesn’t happen overnight. The process is often gradual; something aspiring property developers didn’t think they’d ever seriously get into. But, as with any tangent in life, adapting to new environments is crucial.
As your property portfolio grows, you too must grow and adapt and branch out your management skills. Property developers typically start out small scale; perhaps renovating a home and selling it – moving to their next property and repeating the process. It’s a tried and tested method which, when properly implemented, steadily enhances income potential.
Things can swiftly move upward, though. You may decide that, on balance, you’d like to keep one of these properties – renting it out, re-mortgaging the home and pursuing your next venture.
The tributaries of your growth suddenly branch out to a whole new and exciting level. You’ll begin to learn the nuances of what works and what doesn’t. For example, you’ll learn that location really does matter. The rental potential of your property is invariably and inextricably linked to location – access to schools, amenities, and stores are what potential renters think about.
Good location isn’t enough, though. Often the best location is adjacent to what’s currently considered the best. In other words, the location of your property will become the “best” in time. This means you can enhance your rental yield greater than if you were to buy in the currently best available area.
The purpose of your investment is, of course, to add value; enhancing the rental yield of your property beyond its original value. Sometimes you must think outside the box. It’s not enough to sit back and wait for market value to rise. You must actively build value into your investment.
Taking the next steps
Although it may sound counterintuitive, you make money buying the property and not by selling it. The value you purchase the property for is what creates the margin. Trimming off as many dollars as you can is worthwhile. There’s little point paying over and beyond what you need to, even if the location is ideal.
Remember – property development is a risky business; it’s not an exact science. You must be aware of these risks or the risks will swallow you up and lumber a permanent millstone of debt around your neck. Don’t choose the first property you see. Shop around, auction around and save more.
Successful property investing is also about effective planning. You need to foster a strategy that targets the right type of buyer. For instance, targeting students and targeting experienced professionals require two very different approaches. One might require the most basic furnishings, whereas the latter requires a more concerted approach to cater for the higher demands and expectations of professionals. You need to know your market and apply your strategy accordingly. As well as knowing the right buyer, you should also know the right seller.
That’s because the reasons people sell differ, often quite significantly. For example, someone who is divorcing or who needs to move abroad, will require a swift and quick sale. As your hand is much stronger, you can strike a better deal. Always keep these factors in mind; they’re not minor details.
As your property portfolio grows, the financial end becomes ever more complex. You’ll need to consider all manner of costs, including those costs you don’t anticipate – such as maintenance costs. Your financial strategy needs to be thorough, sound and robust.
Building your property portfolio can be tough. Often, it’s wise to outsource much of this work to professional management agencies who, for a small fee, can manage your properties in a very effective manner. It means you don’t need to worry about maintenance or tenant selection. It also helps untangle your time, allowing you to pursue other projects and other investment opportunities. Property development can be a time-consuming, stressful affair. If things become overbearing, it’s good to take a step back, evaluate your portfolio and learn from your mistakes.
Remember – property development is a risky business. There are no hard and fast solutions. It requires thorough preparation, research and an active need to avoid complacency. When it goes well, property development can rake in the cash; when it goes wrong, it can go horribly wrong. Invest the effort and the effort will pay dividends.
If you would like help managing your property don’t hesitate to contact us by email or give us a call at (801) 599-4836. We would love to help!