Portfolio property management
For effective portfolio property management, as with any investment, there are only two reasons why people invest in any asset: for capital growth or income. Whether you buy stocks, bonds, commodities, property, land, forests; every investor makes a decision to buy based on their own needs and their knowledge of the market. With property, it is the same thing: the investor has to decide whether to go for income or capital growth. In truth, this can only be determined by your own set of circumstances and we'll look at both options.
Properties that attract capital growth will be new properties, off plan with instant discounts offered by the developer to the investor. The yields on these properties will still be the order of around 5% but whilst the rental income may cover the mortgage, it may not cover all the outgoings (service charges etc) and these newly built stylish properties tend to attract upwardly mobile professionals who can afford the rent but need to move often leading to rental void periods which investors have to cover, all this equates to a non income producing investment.
On the other hand, properties that produce income will generally tend to be older properties, in areas of stable demand, which tend to be cheaper areas to buy into yet have a stable rental demand The financial formulas thatmortgage companies use to assess whether the property will 'stack up' will determine how much mortgage you would be able to arrange and so you'll be looking for the property to make you money by having an excess of rental income over mortgage payments. Truly simple. These type of properties will be the sort of modest terraced houses in any place where there is good rental demand.
So good portfolio property management should mean, as it does with any investment, that an investor should be able to set their own goals and achieve what they want - whether it is for capital growth or for income, you'll have to decide what the type of property it is that you're buying into and then act, without sentimentality, and decide to buy or not as the case may be.
Making a decision by using a spreadsheet is great but you'll also have to feel good about any decision too, so take your time and see what else your money will buy and what return you'll get in the short, medium and long term as you'll have to cover all three time frames. Remember: the long term is made up of a series of short term decisions.
There are many questions that an investor will have and to the new investor, probably the first question to ask is, have I made the right decision to buy xyz property. Well, time will tell - after all, as history tells us, here in the UK, property tends to double in value every seven to ten years.
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