If you’re planning to make 2022 the year you begin to boost your income through property investment, we have a few useful tips to help you build a portfolio that is as successful as possible.
The real estate industry has gone through huge changes since the outbreak of the COVID-19 pandemic, with property prices soaring in many territories. To this end, there is currently a very real opportunity to make a significant profit from real estate.
Read on to find out more about the approaches you should take when building your real estate empire in 2022 – whether you’re just starting out or looking to increase your portfolio further.
Specialize or Diversify – the Choice is Yours
When building a real estate empire, it’s important to have a clear plan. In particular, you should consider your unique specialisms and the areas of property on which you wish to focus.
Will you be a buy-to-let landlord or will you flip houses? Will you concentrate more on urban centres or rural escapes?
There are benefits to both specialism and diversification. If you choose to keep your portfolio specific – for example, by investing in property within a single region or of a particular kind – you may have the opportunity to:
- Develop a high level of expertise
- Build a strong and clear “brand”
- Utilize the same service providers across the board (e.g. property management companies, maintenance specialists, insurers, specialist software)
- Streamline paperwork and reduce administration
- Become a “known name” within a specific field – a big fish in a small pond
However, opting to diversify can also come with clear rewards. If you decide to pursue different forms of property investment or spread your net wider geographically, you may:
- Appear larger – and therefore more influential – as a business
- Achieve greater “hedging” potential; if the market for one type of property crashes, you are likely to have access to a “back-up” investment to tide you over
- Have the opportunity to increase your knowledge across sectors and collaborate with specialists in a wider range of disciplines
- Access more opportunities to grow your income
As you can see, both techniques have clear upsides – meaning the choice is yours when it comes to deciding which direction to take.
Calculate Appreciation Potential
A key skill that every property investor should have is a clear understanding of appreciation. This term refers to the potential for a property to gain more value as time goes on.
It can be tough to get a clear grasp of how appreciation works, as the property market can be difficult to predict – particularly when it comes to local trends or the sector’s more niche or specialist areas.
Many real estate moguls get where they are by investing in property in “up and coming” neighbourhoods or sectors. Predicting the “next big thing” is always something of a challenge – but intelligent techniques may include:
- Keeping up to date with local or national government investment in certain localities or industries
- Following levels of established growth in individual neighbourhoods – if a particular urban centre or town is doing well, it may be that its satellite communities will quickly start to feel the benefit
- Tracking the locations in which major businesses are setting up major outlets or offices
- Retaining a good grasp of local, national and international property trends – both in the commercial and residential sectors
The above approaches represent just some of the ways in which you can predict natural appreciation.
It’s also possible – and advisable – to look into a technique called “forced appreciation”. Many property experts believe that this is where the real money is.
Forced appreciation is a method that has been tried and tested by house flippers for generations. It involves investing in a low-cost property with significant potential, improving it in order to reach or surpass this potential, then selling it on for a profit
When flipping houses, it often works in the following way:
- Find a property that is run-down, outdated or has the potential to be extended. Ideally, this property should be situated in a desirable or “up and coming” location
- Invest time and money into repairing, decorating, renovating and generally improving the property
- Sell the property on for a value that surpasses inflation and any expenses you have incurred
These same fundamentals can be transferred across many different areas of the real estate sector.
Sometimes, something as simple as financing a basic cosmetic upgrade can be enough to transform a home’s perceived worth. The process can be even more lucrative if you are able to purchase property below its estimated market value.
Check Out Property Auctions
A great way to find low-cost, high-potential real estate is via online property auctions (like those offered through Property Solvers).
Different auction houses tend to specialise in different property types – so be sure to do your research before you get too invested.
The properties available via this kind of outlet are often foreclosures, or may have belonged to an individual who has died “intestate” (without leaving a will). Alternatively, the owners of property up for auction may be looking for a quick sale.
This means that prices tend to be lower than on the open market.
It’s worth noting that auction properties are often sold in the state in which their previous owners left them – sometimes in disrepair or full of belongings or bric a brac – so this is something you’ll need to be prepared to deal with.
You can undertake in-depth research into all available properties before the auction goes ahead, so be sure to check for structural issues and potential legal disputes.
The best properties are often the subject of “bidding wars”, which means it’s important to have a plan in place before the auction begins – including a clear idea of what your maximum offer might be.
To estimate the amount for which a property is likely to sell, you should check out the “guide prices” for each property. This is the figure at which bidding will start.
If a property in which you are interested fails to sell at auction, you may be able to come to a great deal with its owner independently.
Remember: placing a winning bid amounts to a legally binding agreement, so it’s important to be totally confident before you make an offer.
Build from a Simple, Strong Foundation
While ambition is important in the world of real estate investment, you always need to have something to fall back on. Starting small and building from there will enable you to develop a healthy relationship with risk.
If you’re just starting out, it’s usually advisable to invest in a single property. Once that property is at a stage where it is providing you with a regular income, and once all of your processes are well-organized, you may consider making further investments.
Make sure you understand every element of each investment before you take the next step – including liabilities and insurance, then move on carefully and conscientiously.
The above tips should provide ample guidance to anyone hoping to succeed in the world of real estate investment. Whatever the size or type of portfolio you may have, it’s vital to be clear on:
- The intended nature of your investments
- Your portfolio’s appreciation potential
- Your access to lucrative new opportunities
- Your relationship with risk
Once you have all of these factors in hand, favourable outcomes will be much more likely.
