What Property Investors Don’t Want You To Know: Tips for an Incredibly Profitable Property Portfolio

| October 1, 2013

Property

Flickr: James Bowe

When a person owns one or more properties, they are considered to have what?s known as a property portfolio. The main reason why people invest in buy-to-let properties is to receive a regular income or return from their investments.

Because of the global financial crisis of 2008 to 2012, many people have been unable to get onto the property ladder due to unemployment or salary cuts, which has meant that there been more more of a demand for rental properties. Such demands obviously present an opportunity for those with property portfolios to have a virtually guaranteed return from their investments.

Britain is now currently in the process of rebuilding its economy, having narrowly avoided a triple-dip recession, and so with property prices being much lower than the start of the global financial crisis, it is a good time to buy property with a view to letting.

If you have the money to invest in one or more properties to kick-start your property portfolio, but want to make sure that you do everything properly, here are some tips for building an incredibly profitable portfolio that property investors don?t want you to know about!

Apply the Pareto principle to your property portfolio

Have you ever heard of the Pareto principle? In a nutshell, it is a rule which states that 80% of the effects from an event occur from 20% of the causes.

So when you relate this to property portfolios, you could apply the principle that:

  • 80% of problems occur from 20% of your properties;
  • 80% of your rental profit comes from 20% of your portfolio.

You might think this is a strange concept to apply, but when you think about it properly you will see how much it makes sense.

If you have a number of properties, not all of them are going to be profitable for you, and you will almost certainly have problems to do with your tenants or with the properties themselves.

The Pareto principle will help you to determine which properties pay for themselves, and which ones cause you the most amount of headaches, so that you can decide what action to take.

Get rid of unprofitable properties

This might seem obvious but a lot of investors make the mistake of keeping hold of properties that make a loss in the hopes that things will improve soon. If you bought a property but the rental income is not enough to sustain break even (let alone a profit), and similar properties are attracting the same low rental prices, then it is time to cut your losses and sell up.

Only buy in areas where letting demand is high

You should do some thorough research on the demand for letting in an area where you are considering buying a property. Similarly, if you are buying properties to develop and then sell on for profit, you should look to buy property in an area where there is a high demand for property purchases.

I hope this guide on how to build a property portfolio has given you some pointers into the world of profitable property portfolios, post a comment below if you?d like to share some of your hints and tips too!

How to build a property portfolio

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