For any investor delving into the property market, building and expanding your property portfolio is one of the biggest and most important steps in investment progress. Investment consultant Michael Johns takes a look at how to successfully develop your property portfolio and how to choose good opportunities that will produce high yields, security and flexibility.
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Please see below the full transcript of the video:
Hi and welcome to the latest Ask Johnsy. In this one, I’m just going to give you some advice really on building a property portfolio. This list is not comprehensive, it’s just a few bits of advice that I would give any investor that’s looking at developing a property portfolio.
So, the first one I would say is quality over quantity. Loads of people come to me saying “I’ve got a hundred properties. I’m doing really well; I’ve got a great portfolio”. A Hundred properties is not a great portfolio. You’ve got too many properties and you know, unless you- if you feel the need to buy more, you’re obviously not making enough money out of the ones that you’ve got so you’re making the wrong decisions. You want a smaller, more manageable portfolio that’s making you more money. You don’t want hundreds of properties that are making you a few pounds each per month, you’re just asking for trouble really.
Also, the second thing I would say is don’t over-borrow. Interest rates can change your returns dramatically. Don’t borrow more than you’re comfortable with and a lot of people say use other people’s money, mortgage everything to the red line, mortgage everything to the hilt. When that economy changes or when that interest rate changes, when that market changes, you are going to be in trouble and if you’ve not got the funds to back it up, you’re going to lose your portfolio. You’ll be handing keys back in, you’re going to lose all that money you spent on deposits. So, just be really careful there.
Diversification will give you flexibility and it’ll give your property portfolio some stability. So, look to diverse, don’t look to do just one thing, look at different things in order to invest. Look for flexibility in your borrowing. So, really important penalty terms, get out early clauses, that will give you flexibility to change and move into other areas and maybe invest in things as they arise, you know, it’s not always a case that when you’re ready to invest that the opportunity’s there. You know, it might be that you have to in order to move your money around, in order to make that investment. So, be aware of that and having flexible terms on your borrowing, on your lending can be crucial.
You will make mistakes, learn from those mistakes. Minimise your damages, so if you can see that a property is going in the wrong direction, cut it out there and then, you know, cut your losses. Don’t be afraid, don’t try and fight it until you meet your break-even again, you know, cut your losses. Be prepared to take a loss and learn from it. Be realistic in your projections. Do your own projections, don’t take projections from an agent or another salesperson, do your own projections based on your own due diligence. You can base them off somebody else’s projections but make that final decision yourself on what you really going to achieve out of this and what you’re expecting.
Don’t be afraid to use cash-purchases. There’s a lot of really good purpose-built student accommodation out there which will add stability to your portfolio. It may save your portfolio in the case of a rate increase in your mortgages. So, it will take out many market-related risks and obviously as I say, add a lot of stability to your portfolio. Finally, as the gambling motto goes, when the funds stop, stop. You know, if you’re investing out of your comfort zone, just take heed, take time and just think about it and take a bit of time out. I’ve seen a lot of people go way, way, way over the top and it just destroys everything that they’ve got. So, that’s my 8 tips for building a successful property portfolio on Ask Johnsy. Thank you for watching.
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