"The only 'constant' in life is change, so it's essential to understand what those changes are and how they impact on your investment"
Vaughan Schofield, owner of Belvoir Wrexham, offers this advice: “Essentially a property portfolio is cash tied up in bricks and mortar and therefore it is advisable to review how your investment is performing at least annually, if not on a six monthly basis.
Being aware of your portfolio's current performance, what's happening around you and what alternative options are available is exceptionally important.
As with any investment there is no certainty that the journey with that investment is going to be consistent or positive and, from time to time, opportunities may arise which will allow you to perhaps improve on or protect the investment.
It's not uncommon for landlords to put off doing a review of their property. They may pass by it everyday and, because it's still standing and the tenant is still paying rent, they think everything's ok. But this is only a superficial overview and will mean that there are some very important boxes that aren't being evaluated or ticked.
In order to protect the property and your investment it's important to be aware of its internal condition, your tenant's thoughts for the future, plus what else is on offer so you can plan ahead. A thorough review of your property will allow you to assess whether the investment is still viable… or whether it's time to reinvest.”
So, how will we know if our original property plan is no longer working?
“The only 'constant' in life is change so it's essential to understand what those changes are and how they impact on your investment,” says Vaughan.
“For example, it may well be that the area in which you initially invested has altered and is no longer so attractive for an investment property – perhaps the transport links have changed, maybe some of the key amenities have closed down. Additionally, your personal situation and circumstances can change and your current life stage and age may dictate whether a particular investment is still working for you.
Also, does the age of the property mean more and more maintenance issues are arising? Are there properties available that have more manageable maintenance needs? This is particularly pertinent if expensive maintenance issues are likely to arise in the foreseeable future, such as a new boiler or roof etc.
Perhaps you have a large property which is bringing in a high rent but a low yield. Large houses are rarely bought for investment purposes. They can be useful for those looking for incremental growth over the medium term, but if you're looking at yield it is likely to be small, perhaps only 2 or 3%.
An option here could be to sell the large property and invest in three smaller units. This will increase the gross rental income and yield significantly.
Always be aware of the changes that are happening within the property itself and the structure and competition of the property's location. This will make it far easier for you to identify key areas and properties which are going to be attractive for tenants in the future and will allow you to make an informed judgement regarding whether you should sell and reinvest elsewhere.”
Before you commit…
Investing in a different property will present a new set of circumstances and challenges so it's important to fully understand what these are before you commit.
Vaughn says: “Being knowledgeable and aware of all the influencing factors will help you mitigate the risk. You can never have complete certainty, for example, that you're selling at the right time but you can reduce the risk by understanding market conditions and predictions.
There will be financial implications too. There will be significant short-term costs involved in selling your current property and purchasing another. These will include Estate Agency costs, conveyancing fees, removal costs, Stamp Duty, potential renovations of the new property in order to make it rental ready and producing new marketing material.
Without reviewing and researching the local market, plus having a detailed breakdown of what costs you're likely to incur, it will be very difficult for you to come to a conclusion on whether selling and reinvesting is a viable option.”
If you're looking for a helping hand in reviewing your property portfolio talk to your local letting agent.
“A letting agent is your local property expert and will be able to save you time gathering information about the market and its current conditions. They will be able to provide you with essential data and advice so you can make the best judgement based on solid facts and market movement.
We know which areas are good for investment purposes and which to avoid, what types of properties make good rental investments, the advantages or disadvantages of particular properties depending on whether you are looking for yield or incremental growth, what your budget can realistically buy you, plus what rental return you can expect.
A good letting agent can be a one-stop shop who can help you review your assets and renew your portfolio in order to maximise profit potential and get the best from your investment.”
So, is now the time to sell your current rental property and reinvest? Ask yourself the following questions to help you find out:
1. Is your property attracting the right type of tenants?
2. Is the rental return financially viable?
3. Is your property keeping up with current market conditions?
4. Is the property easy to let with no periods of void?
5. Is your property's resale value still rising?
6. Is your property still easy to maintain?
7. Is your current tenant happy and intending to stay long term?
If you've answered 'no' to many of the questions above it may be time to think about releasing your asset and looking for your next investment.
