Successfully building a property portfolio can bring significant returns by providing regular income as well as capital growth. The high worth of these investments means there is much at stake in terms of risk and reward, however, and finding the right balance for you is key.
So here are five tips to help you build your property portfolio with confidence and achieve your financial goals
1. Consider your appetite for risk
Deciding how much risk you are prepared to accept will guide you towards the most suitable type of property investment. This involves consideration of your reasons for investing, but also your main goals.
Be guided by your personal experience in property ownership – you might be at an advantage if you have owned a particular type of commercial property before, for example, and understand how to identify a good deal.
2. Understand your financial options
Commercial mortgages and bridging loans can help you successfully build a strong property portfolio that provides the returns you need. Depending on how you intend to use the new property you might choose an owner-occupier mortgage, for instance.
Commercial investment property mortgages, on the other hand, are more suitable if you intend to take on commercial tenants. Property portfolio mortgages also exist, and these can provide a straightforward way to manage your portfolio of buy-to-let investments from a single account.
3. Seek professional advice
Even if you are not new to commercial property investment it is highly advisable to obtain professional advice before making a purchase. Commercial property experts can highlight issues that you may not have considered, and help you determine the most appropriate type of investment.
This might be to invest in a property fund, for example, rather than a physical building. This can be a good option if you have funds to invest in property, but there are restraints on you in terms of managing the inevitable demands on your time.
4. Know whether rental yield or capital growth is more important
Rental yield may be the main reason why you invest in a property. On the other hand, your main priority could be the capital growth that the property can achieve over time.
Ultimately, identifying which is more important to you can help you decide on the types of properties to include in your portfolio.
5. Factor in all your outgoings when deciding on a property investment
It is easy to be distracted by the profit you could make on your investment without carefully considering all of the costs involved. Without doing so you cannot obtain a clear picture of its potential, and could ultimately receive lower returns than expected.
Repairs and renovation costs can be significant over an extended period of ownership, for example, and consume some of the profits you had expected to receive from your investment.
Building a commercial property portfolio can bring higher yields than residential property depending on the location, although they may also require more active involvement in their management.
Financing such investments in the right way is a key issue, but ultimately, a property portfolio of quality investments that you understand and that suit your lifestyle can bring significant rewards.
Article written by Karl Hodson, UK Business Finance. Karl is responsible for helping businesses across the UK raise funding for a variety of purposes such as working capital, expansion and capital equipment. He has specialist knowledge of raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds and Government schemes.