Building your property investment portfolio can be a daunting task. There are a lot of horror stories out there about people who have ended up in debt instead of getting the returns they wanted. If you are unsure about how to start building your portfolio, there are a few steps that you should take.
Identify Your Goals
Having a plan is important and the best way to start creating your plan is to know what your goals are. There are different types of property that you can look at based on the goals that you have. Investors looking for capital appreciation will need to look at different properties to someone wanting rental income. Of course, it is possible to want a combination of the two.
Your goals will help you choose the first property that you buy. It will also create a roadmap for the rest of your portfolio. After all, you are not going to buy a property that does not help you achieve your goals.
A lot of people make the mistake of thinking that they should get as many properties into their portfolio as they can as quickly as possible. Unless you have endless funding, this is likely to be unsustainable and could cause serious issues. It is better to start small and work your way up to a full portfolio.
Buying one property that helps you meet your goals is the first step. Once you are comfortable with this property and have the funding to buy another, you can start looking again. It is important that you go at a pace that suits you because everyone has different investment speeds.
Keep An Eye On Your Cashflow
Having a property portfolio that puts you into a negative cash flow will not be an investment and you need to keep an eye on this. It is very easy for the figures to get away from you if you are not careful. This is why you need to take the time to create metrics for your financials and review them regularly.
One of the key metrics is ensuring that the income you get from the properties covers your mortgage expenses. Of course, as an investor, you will want the property to provide you profit over and above this. If something is not working financially, you need to consider why and what can be done about this.
Do Not Forget Your Tenants
When you are growing your portfolio it is possible to forget about your tenants and what they need. While you are checking your portfolio and looking for the next property, you need to ensure that your current tenants are happy. The success of your investment will rest on this because you do not want your property sitting empty.
A property investment portfolio can be a great idea, but you need to start it correctly. Taking your time to map out your goals and your metrics is important. You also need to keep a close eye on your cashflows to ensure that everything is running smoothly.