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The Biggest Threats To a Healthy Property Portfolio

The UK is currently weathering a turbulent and unpredictable economic storm, but despite the worryingly over simplistic optimism on some sides and borderline doom mongering on others, the markets are doing all that they can to stabilise. With the exception, perhaps, of extremely high end properties in London boroughs such as Kensington or Chelsea the property market has (despite one or two downturns) remained fairly stable since the triggering of Article 50 and on balance property is still a pretty sensible place to put your money. If you already have a property portfolio you may be looking to bring some new properties into the fold or are an investor in the making looking for some advice before you part with your hard earned capital then read on.

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It starts and ends with you

The property market is relatively stable, as are the financial markets around it such as the mortgage market. If you’re looking for dependable development mortgages now is as good a time as any to get them. That said, stability in a market is not a surefire indicator of wealth and success. It’s not just enough to buy property as cheap as you can then wait for its value to skyrocket while you quietly rake in passive income. Real success in the property market comes from a combination of strategy and prudent investment. In a (relatively) stable market, the one variable that can determine your success or failure is you. It’s your shrewd decisions that will determine your success and your ill advised moves that will determine your failure. Fortunately, we’re here to give you a heads up on the biggest threats that can stand in the way of your success in the market. SPOILER ALERT- They’re all poor decisions that you can make (however well intentioned they may be).  

Threat #1- A lack of diversity

If you have one or two propertied of the same type in the same area and they appear to be working for you, then it can be tempting to triple down when it comes to your investment, but never underestimate the danger of putting all your eggs in one basket. Even if you’ve invested heavily in an area that’s up and coming or newly gentrified, you could do worse than investing in different types of property within that area. If something happens to compromise the property in the area where you’ve invested you could find yourself facing a rental drop which you may be able to mitigate by investing in different types of property.

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Threat #2- An unfocused investment strategy

Not all properties are great investments. It’s important right off the bat to decide what sort of investor you want to be. Do you want to be an absentee landlord who sits like a mother hen atop several rental properties? Do you want to buy properties, give them a lick of paint and flip them as quickly as you can? Do you want to buy properties in need of serious renovation and spend a lot of time and money doing them up so that you can make a hefty profit way down the line? Trying to be all things to all properties will likely eat into your finances and lead to inevitable losses. Focus on your strategy and buy only properties that comply with it.

Threat #3- Clinging to a money pit

Emotion can never play a part in a successful business strategy, and falling in love with a property that turns out to be a money pit has been the undoing of many a developer. Nobody wants to admit that they’ve backed the wrong horse, but at the same time a savvy investor knows when to let go of a dud investment. If you’re clinging to a property that either can’t find a tenant or experiences a high turnover of tenants with long gaps between, it’s not only syphoning your cash away but presenting you with an opportunity loss on other, better properties. In the long term, taking an up front loss on a property is okay if it means you can replace it with a much higher yield property.

Threat #4- Under investment

It’s an age old saying but it’s absolutely true that it takes money to make money. New investors can be skittish when it comes to ongoing investments but if you think that property is a one and done investment, think again. Success in property requires a lot of investment not only in a property itself but on the associated costs such as ground rent, service charges and letting agency fees can all add up and an investor needs sufficient liquidity to keep up with them. In this light, don’t be afraid to refinance strategically to help maintain your liquidity so that you can move on new opportunities if they present themselves.