Creating a property portfolio is a long-term project that needs to be carefully planned. The private rented sector is currently booming so if you wanted to turn owning a property into a full-fledged business then this could be the perfect time to take advantage of the market’s favourable conditions. Total Landlord have created a list of steps to consider when building a property portfolio, covering the main points to get you on the right track.
All businesses, even if they are a one-person operation, should have a clear set of goals and financial aims. As a landlord, your primary objective may be capital appreciation, sustainable rental income, or a combination of the two. Determining your goal prior to making your first property purchase will help guide the future of your property portfolio. Plotting a realistic timeline to achieve your goals can also prove beneficial in keeping the business on track, whilst updating your goals and plans regularly will keep you motivated.
Unlike much of the advice to new business owners, starting with just one investment is the best way to proceed when looking to build a property portfolio. Your first property will set the tone for the future of the portfolio, so taking the time to research and invest wisely will pay off in the long run. Very few landlords are able to create a portfolio by purchasing multiple properties from the start, although you may be the exception. Consider elements like location; would you like the property to be close by so you can manage it yourself, or would you prefer one situated further away that will be looked after by a management company? Whatever you decide, keep your business goals in mind so as not to veer from your business plan.
It can be tempting to buy a property that is somewhat run down and therefore cheaper, with the aim of giving it a quick makeover before renting it out – increasing its value in the process. Indeed, many television property programmes have posited this as a lucrative way to proceed. Realistically, however, it is best to avoid properties that need significant repairs and renovations since the property will stand empty during the process and possibly cost even more over time. Picking properties that need minimal work will make budgeting easier and you will start making a profit from renting out sooner as well.
Any rent you receive will be classed as income by HMRC and it is essential to understand how it all works before you proceed with a property portfolio. Unless you hire someone to look after your finances, which of course is the easiest option, you will have to apply to fill out a self-assessment tax form. You will need to set money aside to pay the tax bill, which will be due the year after the income was earned. To find out more about legal and tax requirements, read the government’s guide here.
Once you feel secure in your finances, you can start thinking about adding value to your properties, which will help to grow equity alongside rent income. Adding value can be done through renovations, through subdividing the land, adding dual occupancy or increasing the number of bedrooms. Different methods will suit different properties and the kind of tenants you are ultimately trying to attract.
At Total Landlord, we believe in being prepared for the unexpected. When you are renting out multiple properties, the chances of something going wrong increase. Whilst it is always a good idea to have some finance set aside for repairs and emergencies, nothing gives you better protection than comprehensive landlord portfolio insurance. Sometimes things won’t go according to plan,but to minimise the negative impact on your finances, let us help. We have been providing award-winning landlord insurance and comprehensive cover for landlords since 1996. Our dedicated experts excel at delivering high quality customer service and tailored insurance policies that meet your business requirements.
