By Ashley Osborne | Head of UK Residential & Managing Director – International Properties
The potential for higher returns draws most property investors to put their money in multiple properties. However, investing in multiple properties may not be for everyone. If you’re considering to expand your property investment portfolio, it is important to first ensure that you:
- Are willing to put in more funds towards the investment before earning returns
- Have the time or team to manage your second investment
- Have the knowledge about multi-property investment or a consultant by your side to help you make the right decisions
How to create a multi-property investment portfolio
So you have already invested in your first property, and you are considering another one. Investing in multiple properties can be daunting, so we break it down into smaller steps to get you started:
1. Educate yourself
Research online, attend seminars, and speak with fellow investors or experts for advice on making the right second property purchase. Insights from experienced investors would be very valuable to prepare you for what’s to come.
2. Develop an initial strategy
Also known as a blueprint for all your future investments, your strategy should include key elements, such as:
- The person whose name the property will be under – yours or a trust
- How you will finance the purchase and the provider (or providers you are considering) to fund the mortgage
- The goal you would like to achieve from this property investment
3. Start building your team
As your property investment portfolio grows, so will the risks and time needed to manage them. It is important to get the right people on your side to ensure each investment is well managed and will deliver the expected returns in the long run. The team may include other investors, property consultants, solicitors, or mortgage brokers.
4. Get financed
The next step would be to get your financing sorted with your mortgage provider of choice. Once you own property, you will find it easier to finance your next one, essentially because you can use the first property as an equity for the mortgage to finance your new purchase.
5. Choose the property to invest in
The last step is to choose the property. With your multi-property investment portfolio, it is recommended that you diversify. This way, you will mitigate your risks, and avoid additional losses if one market changes and its property values drop. Several ways in which you can diversify your property investment is:
- Location – Economic downturns, major infrastructure changes, natural disasters, or general migration trends can affect the potential returns in a particular location. By investing in different cities or countries, only the property in that city will be affected, while properties in other locations remain financially viable.
- Price – Purchase properties at different price ranges. Splitting your budget into multiple properties of different values allow you to free up cash by selling lower valued asset quicker (i.e. an apartment over a house).
- Type of property – Spread your investment across houses, townhouses, apartments and villas, as they appeal to different market segments, such as families, couples or students.
- Target different buyers – Some areas attract first time buyers, while others draw renovators. Understanding your property’s goals can help determine who you should target and in return the type of property you should purchase.
Ultimately, with a multi-property investment portfolio, the goal is to minimize risk while maximizing your returns, and the above steps will help you do so.
For specific advice on how you can grow your wealth via multiple property investment portfolio, talk to our consultant.