Has managing your property portfolio become a full-time job?
The idea of investment is that your capital works hard for you – not the other way around. However, when you own a property portfolio it’s easy to start tinkering with the management side of things and, before you know it, you’re practically working full-time as a property manager.
What can you do to avoid falling into this trap?
- The transition from landlord to portfolio holder
When you start out in the property business, chances are you begin with one or two properties and a tight management budget. It makes sense to carry out or oversee many jobs yourself, from replacing lightbulbs to arranging insurance and vetting prospective tenants.
As you buy more and bigger properties, however, being hands-on becomes more onerous. It takes up so much time that the really important part of your portfolio strategy – looking for investment opportunities to grow your holdings further – can be neglected. It’s important to remain focused on the long game, not the day-to-day management of your properties.
- Your role must change as your holdings increase
As your portfolio scales up, it’s time to stop the slog and make some smart decisions about how your properties can be managed more efficiently. This could simply involve economies of scale; for example, purchasing a portfolio insurance policy for your properties instead of many individual ones will reduce costs and administration time.
You might also want to make efficiencies in the general management of your properties. Handling your properties as a group could reduce costs for routine work like gutter clearance, gas certificates and decoration. It’s always worth trying to negotiate the best deal, and the more properties you have, the better your bargaining position.
- Having confidence in your investment choices
To build your way to a fruitful and prosperous property portfolio, you need to have ambition and confidence in your ability to select and manage properties.
This means developing the ability to overcome stumbling blocks as well as revelling in your successes: if one property is hard to let, is rented to a bad tenant or suffers from maintenance issues, this should not steer you away from your long-term investment goals. Learn from your mistakes and focus on dedicating yourself to the tasks that will prove most profitable.
- Learning to delegate to others
Handing over management of all or part of your portfolio to someone else involves risk, but then so does property investment! Finding trustworthy, hardworking people to run your properties is challenging, but if you are going to make a step-change into a bigger portfolio and greater revenue, it needs to be done.
It’s true that there’s a risk the professionals you hire might be less thorough or diligent than you would be in their place. However, it’s also possible that working with specialists in areas like finding tenants, property management and maintenance will produce better value for money and long-term gains.
- Don’t forget to account for your own time
When building up your property portfolio, don’t make the mistake of thinking of your own time as free. If you are working the equivalent of a full-time schedule on your portfolio, how much are you really making in return? If it’s less than about £20,000 a year, it’s probably time to ask some difficult questions about whether your investment is really working for you financially.
You should also consider lifestyle factors that might limit your ability to manage your portfolio. Giving up evenings and weekends to manage property might suit some people, but it can take a heavy toll on your relationships, social activities and ability to process stress. Make sure you don’t work so hard that you become ill or your personal life suffers.
- Factor in opportunity cost
Professional investors always look at opportunity cost when evaluating their portfolio performance. This means considering whether you could have made better returns by deploying your funds elsewhere, such as in the stock market or another form of investment.
If you are not sure how to analyse the performance of your investment in comparison to opportunities elsewhere, a financial advisor may be able to help.
Is your property portfolio ready to move up a gear? Whatever strategy you choose for managing your investment, excellent insurance cover is a must-have to ensure your money is protected. Why not talk to Stride about our insurance products?