Growing your Property Investment Portfolio: Our Guide to Get you Started
Are you an existing property investor? We know that taking the next steps comes with some serious considerations and different areas of opportunity to invest in.
But what are the options and what steps could you take to successfully grow your portfolio?
We’ve included here information that will help you begin your planning and consider just some of the options open to you.
Initial Considerations to Grow your Property Investment Portfolio
Before you get started, like any growing business, a realistic objective and a researched business plan will make the difference to the level of success.
Among the areas for considerations are:
Your company structure
Finance
Identifying opportunities
Property management
Professional services and advice
Is your company structure right for growing your property investment portfolio?
There are a number of different ways that a business can establish itself with different advantages and levels of complexity.
As your business grows, exposure to taxation increases and the risk that your own income tax rate could rise becomes a real risk. Not only that but as your business takes on additional finance and responsibilities, you and your business partners are exposed to additional personal risk. If you are releasing equity from your home and assets ensuring that this is correctly accounted for in your business should also be considered.
As your business grows, exposure to taxation increases and the risk that your own income tax rate could rise becomes a real risk. Not only that but as your business takes on additional finance and responsibilities, you and your business partners are exposed to additional personal risk. If you are releasing equity from your home and assets ensuring that this is correctly accounted for in your business should also be considered.
It is important, therefore to structure your business to mitigate these risks as well as providing a structure within which your business can grow and you and your family can enjoy the additional income that it generates.
It is advisable to take advice from a specialist accountant. They will be able to take a look at your current business performance and future plans and provide detailed information on the best structure for your business as you grow.
Financing your Growing Property Investment Portfolio
As an existing property investor, you may have taken out a buy to let mortgage. But it’s possible that you have used money from an inheritance, savings, or equity from your family home.
Financing your growth can be done in several ways;
Buy to Let Mortgage
Equity release
Own funds
Buy to Let Mortgages
Buy to let mortgages typically offer a loan to value of 75% so you will have to find the remaining capital. You could do this by releasing equity from your existing property portfolio, or from the equity in your home. With any finance there is some risk, so you should take expert advice.
Equity Release
You may have unrealised equity in your home, existing buy to let investments or other assets that could be released for investment purposes. In this case not only should you work with your accountant to safeguard your personal investment and reduce your tax liability, but look carefully at how this will affect your cashflow.
Our cashflow forecasting service can help you understand your personal and business circumstances clearly and help you plan effectively.
Our cashflow forecasting service can help you understand your personal and business circumstances clearly and help you plan effectively.
Your Own Funds
Perhaps you’ve come into some money, an inheritance, or have savings that you want to make better use of. Or your business has the required capital for investment. Without any borrowing requirements, you will maximise your profits. Depending on your business structure you may be able to lend the required capital to your business, charge interest and reduce your tax liability. A specialist accountant can advise on the best way to introduce funds into your business for investment purposes.
Top Tip:
At Hawkhurst Invest we work with carefully selected partners who can provide expertise and advice when you need it. Speak to us about your plans and we can advise on who you need to speak to.
Property Management for your Growing Property Investment Portfolio
If you’re managing one or two properties you may be doing it yourself. That means looking after maintenance, managing your tenants, and all the other jobs that managing your buy to let property involves. But with a growing portfolio and increasing pull on your time are you best served looking after your properties, or investing in the services of a professional property management service? Not only can you save time, but the everyday stresses and issues will be managed by your team.
Identifying the Right Opportunities
Some regions represent better investment opportunities than others. The North and Midlands are areas with high housing demand and healthy rental yields for investors.
Read our blogs:
Moving into other Investment Opportunities
There are property investment opportunities other than buy to let for investors who want to diversify their portfolios.
Refurbished Properties
These are also older properties that will have been bought by a property developer at below market value and refurbished. This could mean replacing kitchens, decorating throughout, replacing bathrooms, and anything else that needs improvement. Once complete the developer will place a tenant in the property for three months before putting it on the market. The property and relationship with the tenant will be fully managed.
Commercial Buy to Let
This is a version of buy to let where rather than letting a residential property the landlord lets a business property. That could be retail, office space, warehousing or manufacturing for example. There are particular requirements in terms of finance, and lenders consider this to be a higher risk.
Buy to Flip
This is not a buy to let opportunity, but rather where an investor buys a property, usually at below market value that requires refurbishment. The investor will make the necessary improvements to the property and sell it on for a profit. This is a more labour intensive means of property investment. It requires a number of skills like project management, sound financial management, and an eye for home renovation.
Property Loan Notes
A property loan note is a means for developers to borrow money to finance their projects alongside finance from banks. The investor invests a sum of money in return for a fixed interest rate, for a set term. At the end of the term, the interest is paid and the original capital investment is returned. Terms typically run from 1-5 years, and interest rates circa 8%. Whilst they are not risk-free, property loan notes are considered to be first charge debts so in the event that a developer goes bankrupt, it is highly likely that the investment capital can be recovered. The interest earned will be subject to tax because it’s considered to be income.