The most daunting thing for anyone with dreams of building a property empire is often knowing where to start. There are taxes, regulations, stamp duty, landlord duties and a host of things to consider, on top of knowing what property to purchase, when and where. But could it be easier than it sounds? Andy Foote, director at leading UK property developer SevenCapital explains:
Of course, nothing worthwhile comes easy, however if you’ve worked hard to earn enough to invest comfortably in your first property and you’re prepared to put in the time, research and effort over the long term, that dream of owning your own empire may be much closer to becoming reality than you first realised.
SevenCapital works with landlords in investors from the UK and overseas everyday and as landlords and investors ourselves, we regularly share best practises and guides with our clients to help them reach their investment goals.
When it comes to building a property portfolio – either as an existing investor who wants to scale up, or as a new investor, it’s often easier to digest by splitting the journey into stages. In this case, we call it the four S’s of building a property empire: START, SCALE, SUSTAIN, SELL.
START: the most important part of any journey is simply to start. It can be the most daunting stage – as doing something for the first time often is – particularly when it involves handing over a sizeable sum of money.
But this is the stage where you carry out your research and preparation into what and where your first property is going to be, what type of investor you are and what does and doesn’t work for you. It also includes preparing for things to go wrong so that if they do and you need to stump up an unexpected amount of cash (for example on maintenance costs in a rental property), you’re already covered.
SCALE: this stage is all about safety and is not a stage to rush through. Here is where you’ve established your first property investment and got it up and running and you’re ready to start to reinvest.
You should know by now what your strategy is for the next few stages and how you might diversify your portfolio to get to your goal number of properties – it is vital to have a goal to work towards otherwise you could easily follow a road to nowhere.
Again though, research is key and remember, don’t just look for the best deal at any given time – you need to make sure each property is right for you and fits into your long-term plan.
SUSTAIN: This stage is all about management to make your property investments work hard for you. How do you want to run and manage your properties – do you want to take control personally or are you a hands-off investor, in which case you’ll want a management company to handle to day to day on your behalf – which of course means factoring in a fee.
This stage also includes a review of your finances – what loans you have in place, your income versus your outgoings. Doing a regular review of this can pay dividends – you want to make sure you’re getting the best rates and aren’t paying over the odds.
SELL: This final stage is very much dependent on your goals. Selling might not be part of your plan, but if it is then you want to make sure that your property’s value has reached a healthy return. Historically, holding and maintaining a property for between 15 to 20 years has seen its value double – which is why I always say it’s not about timing the market, but time in the market.
You also need to consider the size of your portfolio at this point and the taxes involved in selling your properties. If not considered carefully, these can come as a hefty blow to your profits.
This of course is always far easier to talk about than to do and if you have any doubts, or concerns you should always seek professional advice, whether that be from a financial or legal perspective. However, the key is always in the planning.
For further tips and a case study from an investor who has been there and done it, SevenCapital has a free to download guide to ‘Building Your Property Empire’ to help get you started on your property investment journey.
For more information visit sevencapital.com.