UK buy to let is thriving at the moment, and there are a number of investors out there that want to get in on the action. Throughout 2021, the UK saw an impressive 7.1% increase in house prices (Zoopla, Q4 2021) and UK rents saw an equally exceptional 4.6% increase in the 12 months to September 2021.
With the above in mind, it should come as no surprise that property investment is becoming more popular with both new and experienced investors. While other asset classes seem to also be growing in popularity, property consistently proves itself to be the most reliable and lucrative out of the many investment classes available. There will always be a demand for property and with the current shortage of stock in the UK, this strong demand is not going anywhere.
Whether you’re about to make your first investment with the view to eventually grow a property portfolio, or you’re looking to build on your existing property portfolio, it requires a lot of careful long-term planning and research so we have created this handy guide to help you successfully grow your property portfolio.
UK property prices increased by 7.1% in the year to December 2021. (Zoopla)
Average rents in the UK have increased by 4.6% in the year to September 2021. (Zoopla)
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Value of the UK private rented sector.
1. Start with a strong investment
The first investment will set the tone for the future of your portfolio so making sure that you buy the right kind of property at the right price is paramount.
Many experienced property investors will often say that making their first investment is the most difficult part of growing a property portfolio as it requires a lot of smart decision-making when you have limited knowledge.
The key to finding the right first-time property investment is doing your research, and lots of it. You will need to research your chosen areas and it’s local property market, what type of tenants you want to attract, property types and what kind of financing you need in place to buy your property. If you purchase your first investment property based on an informed decision then you should put yourself in good stead to grow a property portfolio and earn a steady income from it.
2. Educate yourself on property investment
The research shouldn’t stop once you’ve made your first investment – as a property investor, you should be constantly researching and educating yourself to ensure that your property portfolio can continue to be profitable for you. You should familiarise yourself with the latest legislation relating to property and the private rented sector, the best practices in property investment and the UK property market as a whole so that you can identify where to make your next lucrative investment.
There is a wealth of information available to you – a quick search on a search engine will give you access to recent property market reports, news articles and industry journals and websites that will provide you with all the information that you need. There is also a growing number of ‘property influencers’ and podcasts whose social media pages are brimming with property investment tips and tricks.
3. Add value to your property portfolio
Carry out regular maintenance and cosmetic updates to your property can add value to it, so it’s advisable to keep this up while you are operating a portfolio. This will make the property a lot more profitable when it comes to selling, as buyers are prepared to pay more for properties that require little to no work. Not only will it make the property appealing to future buyers, but it will also ensure that your tenants will be satisfied and comfortable whilst living there. It will also make it more appealing to potential tenants who are looking to move in.
Minor improvements include decorating the property, updating appliances in the kitchen, re-grouting tiles in the bathroom, adding storage and if your property is furnished, making sure that the furniture is of good quality. This is where investing off-plan and new-build apartments are beneficial. Once the property completes, you’ll be assured that all furnishings and appliances will be brand new and of a good standard, and any ongoing maintenance will be dealt with by the building’s freeholder. Brand new properties will also be more attractive to potential tenants and will therefore achieve a higher rental income.
4. Diversify your portfolio
While property is often regarded as one of the most reliable investment classes available, it’s still wise for you to protect your portfolio from fluctuations in the market as much as possible, and the best way to do this is by diversifying your property portfolio. Diversifying your portfolio essentially means that instead of sticking to one type of investment – in terms of property, this could mean investing in different areas, buying properties at different price points or investing in different types of properties. For example, you could have a residential property and a student apartment, which will minimise your risk and maximise your rental income by targeting different types of tenants.
Diversifying tends to work well for investors because it helps them spread the risk in their portfolio by having multiple streams of income – if one form of investment is decreasing in value or you are experiencing a void period in one of your properties, then you will have other forms of income to rely on.