The dynamic landscape of the London rental market opens a lot of opportunities for multi-property portfolios to achieve growth. But there’s one thing that can threaten that success - an underperforming property.
As a multi-property owner, it’s your responsibility to overcome this challenge to ensure that your portfolio enjoys maximum growth potential. Through a strategic approach and careful data-driven analysis, you can increase the earning potential of underperforming properties to ensure higher returns on investments.
In this article, you’ll discover the signs of an underperforming portfolio and the 8 strategies that you can use to revive and maximise the profitability of your portfolio.
Is Your Property Under-Performing?
One of the responsibilities of a multi-property owner is to regularly assess the performance of their portfolio. It’s a crucial task that you must undertake so you can head off potential issues and risks that can compromise the earning potential of your properties.
Although an underperforming portfolio is challenging, it’s not a complicated problem that can’t be solved. But early detection will minimise the risk that it brings and will keep your portfolio’s growth from slowing down.
To determine if your properties have issues, here are the 5 signs of an underperforming property.
Lower Returns
If you notice a decline in the monthly returns of a property, that’s a clear sign that it’s underperforming. For instance, it used to earn £3,000 per month but now it’s only earning £2,500. That needs to be checked.so you can see what’s causing it.
Maybe market conditions have decreased the value of the property. Or your property management strategy isn’t as effective as it was before. After you pinpoint the reason for the decline, you have to act on it so you can keep the returns from declining further.
High expenses and maintenance fees
Sometimes, there are external factors that have increased the expenses and maintenance fees incurred by a property. This can also compromise your portfolio and prevent it from performing poorly. For instance, an increase in the mortgage interest rate means your earnings will be lower than usual. The inflation rate can also affect the cost of maintaining and repairing the property to keep it suitable for letting.
These increases in operational costs can also manifest in the property management fees that you pay. It’s important to keep a list of your operational expenses so you can monitor how the costs are changing over time.
Lack of interest from tenants
Another sign that a property is underperforming is when no tenants or guests are interested in the property. If you’re getting fewer tenant inquiries, this is a sign that the property needs to be updated so it can impress tenants and make them want to stay in the property.
Some might agree to a viewing but once they get into the property, they lose interest. Among the reasons why this happens include outdated amenities, unfavourable neighbourhood conditions, etc. Identify the reason for the decline in interest so you can take corrective action on those within your control.
Short tenancies and long void periods
Frequent turnovers and longer void periods indicate a problem with the rental property (e.g. subpar living conditions). Or it could be a sign that the property management service needs to be improved to ensure a positive relationship with tenants.
Focusing on tenant retention is one way to improve underperforming portfolios. Consider the reasons why tenants are leaving or declining a renewal. Increase tenant satisfaction to improve tenancy periods and occupancy rates.
No room for portfolio expansion
Stagnation in your portfolio is also another sign of underperformance. This could be caused by financial constraints or a lack of attractive properties. Sometimes, it’s also because of overly conservative investment strategies that lead to missed opportunities.
Reassess your investment strategy and adjust your risk tolerance to see if it can improve your property’s performance. Then you can recalibrate your methods to grow your portfolio and keep it from being stagnant for long.
8 Solutions to Revive an Under-Performing Portfolio
As a multi-property owner, it’s up to you to be proactive in maintaining the high performance of your portfolio. Its vitality is tied to your behaviour and the strategies that you use to manage your properties.
Fortunately, several solutions can help you revive an underperforming portfolio.
Conduct a comprehensive portfolio analysis.
Once you realise that your portfolio is underperforming, you need to conduct a thorough analysis to learn what’s causing it. After that, understanding the nuances of the property market gives you the ability to make informed and calculated decisions to improve it. Among the things that you have to focus on include the current movement of the market, the property values in your portfolio and the tenant demographics that your rental properties cater to.
The goal is to align your portfolio so it meets the evolving demands of the rental property market. So if there’s a growing preference for sustainable properties, find a way to meet that need to attract meco-conscious tenants and guests.
Optimise the property finances.
Regularly do the math so your portfolio is growing sustainably and steadily. This is how you monitor the financial health of your portfolio to keep it from underperforming.
Do this by conducting adequate financial planning for your properties. Consider the capital and expenses to determine the right budgeting approach that’s aligned with your portfolio goals. Calculate your target return on investment for each property so you can separate those giving you high and low returns. Adjust the budget accordingly and distribute resources to boost underperforming properties.
Keep in mind that your portfolio will always be at the mercy of market fluctuations. That means keeping an eye on the market’s movement will allow you to strategise and minimise the effects on your portfolio’s growth potential.
Explore strategic upgrades to properties.
An effective way of improving an underperforming property is to invest in upgrades to improve its occupancy rates.
Property upgrades go beyond aesthetic appeal. It’s about investing in the right property design and structure so you can attract the right tenants and guests. You want to get the attention of people who are willing to pay a premium price to stay in your unit.
This means elevating the value of the property to match the lifestyle aspirations of the guests. For instance, attract eco-conscious tenants by equipping the flat with smart home technology or energy-efficient appliances. This can effectively position your property as a modern and sustainable flat worthy of premium rental prices.
Create targeted marketing strategies.
Marketing plays an important role in boosting the performance of a portfolio. No matter how strategically located or beautifully designed it is, your property won’t gain guests or tenants if they don’t know about you. This is why you have to improve your marketing approach to revive your underperforming properties.
Start by identifying who your market is and create a marketing strategy to specifically target their preferences. You may have to create different approaches to fit various property types. Use social media campaigns to highlight property features that you know your target market is looking for. For instance, focus on the location of a property if you want to attract business travellers or international students.
Consider flexible letting as a strategy.
When reviving an underperforming portfolio, it may be necessary to switch your strategy to attract a diverse rental market.
For instance, although long-term letting provides rental income stability, doesn’t have the peak earning potential of short-term letting.
Through flexible letting, you can combine these two letting methods so your portfolio will perform well no matter what conditions there are in the market.
Apart from short-term letting, you can also consider setting up co-living spaces, fully furnished properties and student accommodations.
Take advantage of proptech solutions.
Technology can also improve the performance of your portfolio - as long as you choose the right proptech solution. Consider the needs of your portfolio and how you can streamline property operations.
As a multi-property owner, you’ll benefit from using a smart platform that’ll allow you to efficiently monitor all your properties and tenant/guest transactions. Choose tools to help enhance communication channels, analyse market data, collaborate with property stakeholders, maintain properties and calculate maximum returns.
Check rental laws and market conditions.
The rental property market is a dynamic landscape that’s constantly evolving. One of the factors affecting the market’s movement and behaviour is the rental laws. It’s part of a landlord’s responsibility to keep an eye on the market and rental laws so they can improve their portfolio’s performance while staying compliant.
Regularly review updates on tenancy agreements, tax laws, insurance policies and even sustainability rules. Then you can adjust lease agreements and rental prices accordingly to keep your portfolio competitive.
Work with a property management service.
Partnering with a reputable property management company brings several benefits. They have a wide market reach to help you attract more tenants to view your property. They also have systems in place for more efficient and effective tenant vetting, property maintenance, tenant support and even property market analysis.
By working with them, you’ll benefit from their expertise and experience. They can keep an eye on your properties to monitor for signs of slowing down so they can take action to reverse it.
It’s Time to Revive Your Portfolio
As a multi-property owner, you need to take proactive steps to keep your portfolio from underperforming. Constantly monitor your properties to check for lower returns, higher expenses, lack of tenant interest, longer void periods and a compromised portfolio expansion.
If your portfolio has any one of these issues, you should be quick to act and apply solutions to revive your property’s performance. Analyse your portfolio to identify what’s causing the decline in performance so you can choose the best way to reverse it. Among your options include data-driven decisions, strategic marketing approach, property upgrades and many more.
Partnering with a reputable property management company is also a solution that you can consider. Opt for companies that use property technology to optimise the management of your portfolio’s growth.
If you wish to explore different ways to deal with underperforming properties and portfolios, let’s talk. Opago offers property management services coupled with a smart platform to ensure your property investments will thrive.
