Purchasing Several Investment Properties?fjpinvestment
Your ultimate objective as an investor, even if you’re just starting out, may well be to build a diversified portfolio of properties. This is a laudable goal for many who decide to invest in UK real estate. Even though a single property can give you a steady stream of income and good capital appreciation that can add to your regular income, think about what a portfolio of several properties can do.
Notwithstanding this obvious fact, it’s more difficult than it sounds to grow a portfolio from the beginning, especially if you have a small amount of money to invest. The answer to the question, “How many investment properties can I own without getting into financial trouble?” frequently depends on how you spend your money.
If you’re ready to make your first real estate purchase but are also interested in learning how to acquire many investment properties without having to wait several years, then keep reading, as this is the topic for discussion in this article.
The number of investment properties you can own is limited only by your financial resources to acquire them. Having noted this, the price tag puts it out of reach for many investors. The strategies presented here will give you a leg up on the competition by allowing you to invest in several homes at once without breaking the bank.
Is it a good idea to buy more than one buy-to-let investment property?
If you are new to property investing and thinking about buying your first property, you may be wondering if you would want to go further later and buy additional properties.
Those who are serious about generating money through long-term investing often buy many types of properties and create a diversified portfolio of property types and locations.
It’s a good moment to invest in real estate since average home prices have risen to over £290,000 and rental prices have increased by over 9% in the previous 12 months. Investing in more properties is a terrific strategy to benefit from the current upswing in the real estate industry.
Having a larger portfolio of assets provides a number of advantages, including the following:
- Rental returns from multiple properties will significantly increase your cash flow. This will allow you to save or reinvest in further properties.
- Spreading your risk makes it less likely that you’ll lose money if the value of one of your properties goes down because of changes in the real estate market.
- A well-managed portfolio can help you reach your financial goals more quickly.
- Without the need to maintain a separate income stream, you may instead think of your investment portfolio as a full-time business and make it your job.
How can I buy many investment properties if my budget only allows for one?
To get started with property investing, you must first determine how many investment homes you can afford at once.
It’s possible that you’ve already located the ideal apartment or house for an investment, with the only drawback being that the price is so high that you’ll have no money left over after closing the deal.
When confronted with his proposition, you may consider devoting your entire budget to purchasing one home now and then using the rental income to fund your second investment.
Even though it’s possible to go this route, and many people do, it’s not a good idea if you want to quickly add to your real estate portfolio because it could take years to save up enough money for a second purchase.
To avoid being stuck buying a single investment property every year, and to get your portfolio off the ground and soaring, consider the following as a way to do this.
Look for discounted rates
One easy strategy to increase your property portfolio is to ignore the expensive house you’ve found and instead look for bargains in the area. This means finding properties that are essentially below market value.
In this context, “below market value” refers to a price that is lower than the median home price in the same locality; it refers to the fact that similar houses in the neighbourhood may be found for far less money.
There are various ways to find these types of properties. For example, many real estate investment firms and builders advertise below-market off-plan investment opportunities. An off-plan property is one that is currently in the planning or building stages but is already available for investment.
When considering how many rental homes you can afford to acquire on a smaller budget, off-plan properties may be the best option to consider. There are both advantages and drawbacks to investing using this strategy, such as:
The advantages of this approach
- This method of purchasing rental properties is economical. Spreading your investment money over more than one property is a smart financial strategy.
- The fact that off-plan homes are brand new is a huge plus, since it means that they’ll likely be in higher demand from tenants. Given that newly built properties also come with a high level of energy efficiency and meet current standards, they will be particularly sought-after by many young and eco-minded tenants.
- By going through an investment company to buy apartments, you can make the process of investing easier and get good advice.
- Off-the-plan real estate investments are frequently developed in high-demand neighbourhoods or revitalisation hubs, making it simpler to find suitable renters in the consumer market.
- They could grow in value and be worth more than what you paid for them before the project is even complete.
Limitations of this approach
- These investments are off plan, so you won’t see any returns until the property is finished. This wait time might be significantly extended if difficulties arise during the construction phase.
- When purchasing a home before it has been completed, the buyer must do further research to confirm the developer’s standing in the real estate industry. Start by researching and assessing previous projects to understand their track record.
Invest in a fixer-uppers to get your foot on the investment ladder
Many real estate investors prefer to purchase older properties that require extensive repairs over brand-new developments. These are run-down properties that need work before they can be either rented out or sold for a profit (aka “flipping“).
This kind of real estate, sometimes known as a “fixer-upper,” is popular among investors who like to make a purchase at a lesser price, invest in renovations, and then resell the property at a higher price. A word of warning, though: this type of real estate investment usually requires more knowledge and experience to be successful.
If you’re trying to figure out how to acquire more than one investment property on a limited budget, this strategy may be a smart alternative, since it helps you to find more reasonable offers with the same budget.
Real estate brokers and auction houses are common places to find properties in need of repair. Guide prices are often far lower than market average home prices.
Financial gains on the sale of a property might be reinvested to increase your overall number of property holdings.
Nonetheless, this tactic necessitates budgeting for the price of remodelling, which in turn necessitates time, preparation, and, as mentioned above, specialist knowledge.
The advantages of this approach
- Flipping houses can bring in a lot of money quickly, which can be put back into the business or used for other things.
- If you’re looking to diversify your real estate portfolio, buying houses or apartments that require work might help you save money.
- Modernising an older home can raise its value and make it more attractive to a wider range of buyers or renters.
Limitations of this approach
- Oftentimes, expert knowledge and experience are needed to make a go of it. Having this information will allow you to remodel each home in the most cost-effective manner possible.
- It might be a while before the renovations are finished and the homes can be sold, meaning you could go without income for a while.
- It’s possible that there could be issues throughout the remodel that increase the total cost of your investment and leave you with a loss. With experience and expert help, this risk can be greatly reduced.
Save money on bulk buys
Purchasing many units in the same development can be a great way to save money and get a jump start on your real estate portfolio. You may be able to save money by purchasing many apartments at once from the same developer or investment firm.
This means that you may be able to purchase more than one apartment for the same price as a single property, or perhaps even less.
This is another common tactic among those who invest in homes before they are completed. This is an excellent strategy for people who have wondered how many investment properties they can own at once.
The advantages to this approach
- The more new build units you buy at once, the better the discount you tend to get.
- When you buy into an off-the-plan property development, you have first dibs on the best available homes.
- You won’t have to spend as much time as before learning about the market and the properties on the market.
The limitations of this approach
- Rather than spreading out your buy-to-let assets across residential and student housing, you’ll own apartments in the same complex. This reduces the portfolio’s diversity.
- Just like with purchasing a single off-plan property, you may run into delays in construction and other problems.
Borrow the money to buy more
If the options listed above don’t gel with you or aren’t suited to your investment strategy, you can always consider borrowing cash from a close relative or friend and using it to make further investments.
After you buy your first investment property, you may find that you don’t have enough money to buy more and add to your portfolio right away.
One option is to borrow the funds from a close relative or trusted friend and pay them back once you’ve acquired the other home you’ve been eyeing up.
While this strategy may prove fruitful for a select few, it is often not an ideal strategy to follow. Real estate investment is a serious business, and as such, you shouldn’t have to rely on anybody except yourself. Besides, if something goes wrong, relationships will suffer.
Most savvy investors would advise against doing this because of the potential for upset if you are unable to repay your loan in a timely manner. If you want to build up a large number of rental properties, this is probably not the best way to do it.
There are benefits to this approach
- If you have a kind relative or friend who is prepared to loan you the money temporarily, you might speed up the process of purchasing real estate.
- Instead of just taking out a loan, you and your lender could work together to invest the money you both have.
Limitations of This Approach
- Your relationship with the lender may suffer if you are unable to repay the loan. Is this a risk you want to take with a close family member or friend?
- Relying on the good fortune of others to support your own venture reduces your financial independence and security.
Purchasing REITs (Real Estate Investment Trusts)
If you are new to property investing, you may be surprised to learn that investing in real estate doesn’t have to mean purchasing a property for this purpose.
A real estate investment trust (REIT) is a company that finances, owns, or takes care of real estate.
When you invest in a real estate investment trust, you are buying a piece of the company’s real estate portfolio. This is similar to investing in stocks.
If you’re just getting started in the investment world and don’t have a lot of capital on hand, this may be a good option because you’re not actually buying the property. You are buying shares in a company that does.
REITs are considered a “liquid” investment as opposed to a “physical” investment such as real estate since they function similarly to stock and share investments. This raises the risk level somewhat.
The benefits to this approach
- You are able to invest in the property market without owning or taking responsibility for the physical building itself.
- Depending on how the market does, your returns might go up in tandem with the value capital growth.
- Due to their high liquidity, buying and selling REITs is a much faster process than investing in real estate yourself.
The limitations of this approach
- You won’t be the legal owner of any rental properties, so you won’t be able to collect rent or get the full financial benefits of your investment.
- Property investors can’t do research on their assets, which makes it harder to figure out how much their REITs are worth.
- The value of your investment might go up or down, just like any stock, and you could end up with less than you put in.
- Because of their high degree of liquidity, real estate investment trusts are more volatile than traditional real estate and react to market shifts more quickly.