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As one of the busiest cities in the world, London presents several opportunities for property investors. It’s safe to say that it’ll always be a dream destination for business people, travellers or anyone wanting to explore new opportunities for a better life.
Why is this important for property investors to know?
The allure of living or going to London presents an incredible opportunity to grow a property portfolio. The more people wanting to move to London means there’s a higher demand for property in the form of residential and commercial spaces.
As a property investor, you need to position yourself to ride this growth so your portfolio can benefit from it. Statistics show that the UK Residential Real Estate market is expected to grow into a £372.53 billion market in 2029. If you know the right real estate investment strategy to pursue, you can enjoy incredible returns as the market expands in the next few years.
Of course, the key word here is knowing the “right strategy” to invest in. It’s crucial to understand what your options are so you can determine which one aligns with your specific portfolio goals best.
In this article, you’ll get insights into 3 investment strategies that property investors can choose from in London. The potential of these strategies to grow a portfolio is significant - as long as you know how to implement them and find the resources you can use to scale them.
3 Strategies to Scale Property Portfolios
Scaling your property portfolio requires a strategic approach. You have to remember that it’s not just about choosing the right investment that’s aligned with your objectives. It’s also important to analyse the current dynamics of the market so you can find the right timing to push through with your investment.
Among the different investment strategies that you can pursue, there are 3 that are poised to give your portfolio the most growth.
Buy-to-Let Strategy
The buy-to-let strategy involves the acquisition of properties to rent them out. This will allow you to earn a steady stream of rental income. You can use the Buy-to-Flex strategy offered by Opago so you can maximise your portfolio’s revenue returns. This strategy uses the flexible letting method to combine the high-income potential of short lets and the stable revenue from mid lets and long lets. Combined with the capital appreciation of the properties, you can get sizable cash flow from the letting strategy you’ll use.
If you invest in different types of properties and target various guest or resident profiles, you can achieve portfolio diversification. This can secure your investment and lower the risk of losing.
Of course, you’ll have to be cautious of the risks like the fluctuating interest rates. The buy-to-let strategy involves a buy-to-let mortgage that only lets you pay the interest of the loan. This means your monthly payments will be directly affected by rising interest rates. Changes in the letting regulations can also affect your income potential. You need to keep an eye on these changes so you can adjust and comply with the new rules.
To maximise the benefits of the buy-to-let strategy, you have to find profitable properties in the right location. The goal is to have a rental property with a high demand so you can enjoy high occupancy rates.
You should also look for a property management company that can manage all the properties for you. Trying to manage multiple properties at once can be time-consuming. With the help of a capable company like Opago, you’ll enjoy white-label operations that include housekeeping, maintenance, compliance and guest services. If your properties become known for exceptional property management services, it’ll attract more guests and residents and it’ll increase your revenue returns.
Commercial Property Strategy
Investing in commercial properties is another strategy that you can do as a property investor. It involves getting real estate assets that can be used for business purposes. This can be an office space, retail outlet, events venue or an industrial facility.
With the UK being the 2nd-largest European commercial property market, your portfolio will surely benefit from the cash flow opportunities and capital growth.
The difference between this investment and the buy-to-let strategy is the higher rental yields and longer lease terms. Some instances would even bring benefits like tax breaks or discounts.
Among the risks that you have to consider are the higher maintenance and more complex legal arrangements. As long as you’re working with a professional and experienced property management company, you can efficiently deal with these risks.
Property Development Strategy
Unlike the other two strategies, this type of investment will get you involved during the building process of the property. It could be a new development, renovation or refurbishment. You’ll acquire a lot or property for improvement then you’ll earn from it by either selling or renting it out.
This type of investment strategy promises incredible yields. Since you have full control over the construction process, you’ll open a lot of design opportunities. You can choose to make the property 100% sustainable and you can integrate as much smart technology as you can. This will also give you control over the value of the property. You can turn it into a high-end luxurious apartment or a simple yet functional unit that’s more affordable.
While it seems very rewarding, this investment strategy can struggle with delays in permits and various approvals. These can compromise the construction schedule and make you lose money in your investment. The rising cost of materials and labour can also work against you. Proper planning is a must to minimise the effects of these risks. Partnering with the right professionals will also ensure that the investment returns won’t be compromised as the project progresses.
Tips to Choose the Right Investment Strategies
Each of the property investment strategies has its own profitable and risky traits. How will you know which investment to pursue? Here are essential tips that property investors can use to choose the right investment strategy that aligns with their portfolio goals.
Assess goals, risks and resources
Before starting any investment journey, it’s always wise to know your capabilities and where you’re starting from. This is why you have to clearly define three things.
First, define your investment goals. What do you want to achieve out of new investment? How do you want your portfolio to benefit from it? Take a look at your current portfolio and look at areas you want to expand and grow.
Second, you should assess your risk tolerance. All investment vehicles are risky. Some are high-risk while others aren’t. As you check your portfolio, you’ll get an idea of what type of risk you can accommodate. In case things don’t work out as planned, your portfolio should be able to handle it.
Third, evaluate your financial resources. Your new investment would need funds. Take a look at your portfolio and see what you can capitalise on. Knowing how much you have to work on will give you ideas on what you can afford - or how you can supplement it in case it’s not enough.
Analyse the market, property and economic conditions
Once you know your investment capabilities, it’s time to educate yourself. Analyse the property market and see how it’s moving at the moment. Focus on the available properties for sale. Is there enough supply to meet the demand? According to the February 2024 property market data, the supply and demand for housing is already balancing out. This is good news for property investors wanting to expand their portfolios.
Apart from the supply and demand, you should also look at hotspots around London. Are there locations poised to become development hotspots? Areas that have infrastructure projects and structural developments are most likely to experience a boost in property value. You’d want to invest in these areas. Maybe you can use the buy-to-let strategy to acquire properties in anticipation of an influx of travellers brought about by the new developments.
It will also help to look at various economic conditions like interest rates, unemployment rates, population boom, migration patterns, etc. These will give you insights that’ll help you pick the best property investment at the right time.
Seek professional advice
Consulting professionals is always a wise move when it comes to investment decisions. You can rely on their expertise and experience to provide you with valuable insights and guidance. They can provide tailored advice so you can reach the specific goals you’ve set for your portfolio.
There are several professionals that you can come to for help. Real estate agents would know about properties that you can invest in. Mortgage brokers can provide advice when it comes to the financial side of your investment.
You can also go to property management companies for advice. They deal with guests and residents so they have first-hand knowledge about letting strategies and how you can get significant returns from them. The best thing about property managers is they can help you identify the right properties to invest in and they can also manage it for you. They can assist you in facing the challenges of managing and maintaining properties for rent.
With the right professionals advising and assisting you, it’ll be easier to maximise returns to reach your portfolio goals.
Work with Property Experts to Achieve Portfolio Growth
Property investors are always on the lookout for new investments that can grow their portfolios. As an investor, choosing the right strategy is crucial to achieve long-term success and maximum returns for your property portfolio. Whether you decide to pursue a buy-to-let, commercial property or property development strategy, it’s important to evaluate your goals, finances and market conditions. It’s not just about finding the right investment to use. It’s also about knowing the right timing so you can maximise the return on your investments.
This is why working with property experts can be beneficial. You can rely on them to guide you by pointing out opportunities that you can grab.
If you want to know more about investment opportunities, let our property experts at Opago help. Contact us so we can sit with you to discuss your portfolio goals so we can create tailored solutions to achieve them.