Whatever your long-term financial goals, investing in property in Brighton and Hove could be a sound move. With interest rates still relatively low, but rising, buying rental property now is a good choice. Property investment can still bring in a much higher return on investment than any savings account – both from rental yields and the growth in value over time. But what if you’re thinking bigger than just one buy to let – what if you’d like to make a career out of property by investing in a whole portfolio?
Our advice on how to start a property portfolio is to start small, research the markets and always keep a close eye on your finances. To help you learn more about becoming a property investor and building a portfolio in Brighton or Hove, we look at the key steps to being successful…
You need to think about why you want to build a property portfolio, setting your own unique goals. You might want a profitable way of investing some spare cash, a safety net for your retirement or a change or career. This will help you work out what you want from your property portfolio and investment strategy; whether a comfortable monthly rental yield, decent capital growth – or a bit of both.
You need to be pretty clued up about the property market as well as the duties and responsibilities of landlords. Before you make an offer on a property, read as much as you can about house prices, rents, supply and demand and the political and economic factors which could make or break your portfolio of investments. This will help you decide the best time to buy as well as what type of property to invest in and your ideal locations.
Before you start building a property portfolio, get your finances in order; understanding how much you have to invest and how much capital you will need to raise. Buy-to-let mortgages generally require a larger deposit than residential ones. You’ll also need to factor in all the costs associated with buying your first investment property – surveys, conveyancing fees and stamp duty. You will need to pay the additional 3% stamp duty surcharge on a buy-to-let if you already own property.
Remember that tenants will expect a good standard of accommodation, so add in refurbishment, as well as repairs and maintenance costs further down the line. As you grow your portfolio, always be conscious of your cash flow. Make sure you have enough money to cover your mortgage during void periods – if you can’t find a tenant or if they fail to pay their rent.
While there’s always some element of risk to building a property portfolio, it’s worth exercising a bit of caution too. Don’t expand too rapidly – by borrowing too much against your existing properties you risk wiping out your portfolio if things go wrong.
If you’re new to property investment, you need to take a measured approach. Start with one property, building your portfolio gradually as your experience, knowledge and funds grow. There’s an argument for making your first investment in a local area, which you know well and where you are on hand if there are problems. However, if you’re happy to place the property in the hands of a letting agent, you may find a more affordable buy to let further away.
Set yourself a budget and stick to it. Remember you won’t be living in the homes, so view them with a detached eye – look for decent properties in good marketable locations. If they need work, make sure your budget will stretch to bring them up to standard. Making a cheeky offer could pay off and land you a great deal if you are in a strong position to buy. However, you want to be taken seriously by sellers – and estate agents to get access to the right properties as they come on the market, so be realistic. Don’t get yourself a reputation as a chancer and a novice!
When looking for suitable tenants to occupy your buy-to-let, it’s important to conduct references and screen prospects to find the right person for your specific needs.
A range of factors come into play, including how quickly they can move in, whether they’re willing to pay for multiple months upfront, whether they’re long term and your overall gut instinct on whether they’ll be good tenants and treat your property well.
After you have conducted a thorough screening process and met the tenants face to face you will reduce the prospect of disputes and hopefully increase your chances of a long-term and stress-free tenancy.
It’s important to remember that you should be careful not to discriminate against people based on certain ‘protected characteristics’ such as age, or disability.
If you are relying on your rental yield for a monthly rental income, make sure you look after your tenants, as well as your growing portfolio. Happy tenants are more likely to stay in your properties for longer, meaning fewer void periods. This means complying with all your legal obligations and ensuring the home is a decent, safe and comfortable place to live.
If you’re managing the property yourself, maintain open communication with your tenants, respond promptly to all requests and always keep records of transactions in case you need evidence in future.
With property portfolios, there’s a lot to be said for keeping your eggs in different baskets. While investing in similar properties means you can specialise, it also puts you at risk if that market slows down. Look at different types of property as well as different geographic areas. So, for example, if you start by investing in Brighton’s student accommodation, you could make your next move to the market for young professionals and then look at family homes further out of the city.
An alternative option to buying a traditional property is to buy off-plan from developers.
Investing in these properties can bring significant benefits. These include the increased potential for higher capital growth, annual returns and overall profitability due to the fact that you will usually be buying at a lower price before the property has been built.
Another benefit of buying a new home is that it is more likely to be safe and energy efficient. There are disadvantages too so it’s important to mitigate the risks by thoroughly researching and speaking to developers to understand their history and quality of work.
Always think long-term with an exit strategy for when, and in what circumstances, you will sell your properties. Your aim might be to pull in as much rental yield as you can while you’re prepared to manage your portfolio, before selling to release the capital for your retirement. You need to view your strategy alongside market trends, to give you the best chance of selling at the optimum time. However, it’s important to be aware of any tax implications including capital gains tax.
If you’re considering building up a property portfolio, starting in the Brighton and Hove area, we’d love to chat to you about your strategy and show you some of the homes we have available. Give us a call today.
Do you have any questions about the topic above? Our team of experts is here to help in answering any query you may have.
Fueled by his desire to be the best, most reputable estate and lettings agent in town, Steve has spent his career cultivating The Property Shop. Steve prides himself on his authenticity, honesty, and knowledge-base which is emulated by The Property Shop and his team.
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