When is a good time to expand my property portfolio?
This question can only be answered by taking a step back, looking at your situation, and assessing when is the right time for you to invest further in another property.
Portfolio expansion is something many buy-to-let investors hope to achieve. The larger the portfolio, the larger the profits, generally. A larger portfolio allows you to spread the risk, and you’ll be better protected against the risk of void periods. The more properties you have, the less likely you are to be seriously affected financially if one property is empty.
What are your goals?
In answering the question, you need to first establish what your goals are, both short-term and long-term. Do you want income from your properties to provide you with complete financial independence in the near future, or are you happy to expand at a slower pace over the next 5-10 years?
What are your risk levels?
As with any form of business expansion, there is always a risk to your financial security if you expand too fast, so it’s important to carefully assess your individual financial situation to ensure you don’t put yourself at risk. If you feel your current portfolio is working for you in terms of income and returns, and expansion might only rock the financial boat, then expansion might not be the right move at the present time.
But if you would like to expand your portfolio in the near future, carrying out a full assessment of your finances is crucial. If a mortgage will come into play, perhaps seek advice from a mortgage advisor. Are you planning to remortgage another property in order to raise capital?
Are you managing cash flow and repayments?
Are you struggling to afford the repayments on other properties? Unless you have your cash flow under control, you won’t be able to purchase new properties. It is always best to invest in the right properties to ensure you maximise value and returns, as this should allow you to expand more quickly.
Do you have enough equity?
If you have benefited from capital growth with your other properties then you can remortgage to release equity. This equity can then be used to fund your next investment. Remortgaging is usually preferable to taking out a loan, and allows you to release some of the equity tied up in a property.
Whether or not you expand your portfolio at this time will depend on multiple factors, including the ones outlined above, and your individual circumstances. It is always best to seek impartial advice, thoroughly assess your financial situation and goals prior to investing in a new property. For more guidance and letting agent services, contact us today.