If you are looking to begin creating your own property portfolio, you will need to formulate a careful plan for this long-term project. The private renting sector is a burgeoning market and profitability is high. This means that there is no time like the present to take your fledgling property portfolio to new heights.
We have created a comprehensive list of important steps to follow to get your property portfolio off to a flying start.
Step 1: Set Goals
No matter what type of business you are in, it is essential that you begin with a clearly defined set of goals and financial aims. Because you are acting as landlord, your primary goal should be capital appreciation or sustainable rental incomes or some sort of combination of these two equally important goals.
By determining the primary goal of your portfolio before you even begin to make a property purchase, you will set your motion in direction from the very beginning. This will allow you to perform the next step of plotting an achievable timeline which will keep your efforts on track and ultimately prove the shortest distance between you and your goals. You can then keep your goals regularly updated which will fire your motivation.
Contrary to much of the advice you may find for other types of business owners, beginning with a single solid investment is often the best way to go about creating your property portfolio with a property investment loans. The first property you invest in will set the tone and pace of your entire portfolio so it pays to invest plenty of thought and planning into this first over.
Most investors will have a hard time investing in more than one property at the beginning of their investment portfolio, but you just might be the exception to this general rule. Consider all the elements that are connected to this decision. Is the property better close by where you can handle the specifics yourself? Or, would you rather have a property management company handle those affairs allowing you to choose properties from anywhere on the map.
No matter what you decide at the end, remember that you must adhere to the original goals of your portfolio plan.
Go for Good Condition
The “fixer-upper” is always a tempting offer because they are so cheap and can fill the mind with all kinds of ideas for improvements that will increase the value of the property. As a matter of fact, there have been many business plans that promote this idea for investing. But it is more realistic to assume that this type of idea is going to require far more resources of time and cash to bring to the point of profitability.
Until renovations and repairs can be completed, the property will remain at a standstill, costing you plenty but not delivering anything back in the way of profits.
All the rents you can collect from rental properties will be considered income by the HMRC and it is especially important to understand how this works before you begin with your property portfolio. On the other hand, you can always find someone to manage your properties that has a keen understanding of how to look after these finances. This is by far the easiest way to address this matter. But you will still need to apply for the self-assessment tax form and set money aside to ensure that your taxes are paid on time. Taxes must be paid within a year from receiving income. If you are not fully familiar with how this works, you can find out more information about the tax and legal requirements for rental properties right here.
Once you feel more confident with your tax situation, you can begin to consider the option of adding value to your properties and thereby fattening your bottom line through improved equity and greater rental collections. This can be done by dividing the land and making two properties. Creating more bedrooms, etc. There are many ways in which this can be done but it all depends on the property you have and the type of tenants you hope to attract.