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Jun 18

How Do You Know When It’s Time To Expand Your Property Portfolio?

Reading Time: 3 mins

Building a property portfolio is one of the best ways to secure your finances in later life. Your first property investment will always be a challenge and there are a lot of things you need to learn along the way. It’s likely that you will make a few mistakes but, hopefully, you will start earning a good income from it and learn to manage the costs. 

When you get to the point where you are seeing a healthy return from your investment, you might be thinking about expanding and buying some more properties. However, it’s important that you are cautious because if you expand your portfolio at the wrong time, you can make things very difficult for yourself. The problem is, a lot of people don’t know how to decide when the time is right. If you want to grow your property portfolio, these are the key things you need to consider. 


What Is The Property Market Like Right Now?

Before you make any decisions, you need to dig down into some research about the current state of the property market. Look at the general trends as well as the market in the specific area where you want to buy. If property prices are rising rapidly in the area, it might not be a great time to buy. You could save money and maximise the return on your investment if you wait until property prices dip a bit. That way, you can take advantage of future price increases. However, if that dip is sustained for a long time, it could be a sign that the area is in decline and you should start looking at other locations. 

Instead of just thinking about whether you should expand your personal portfolio, consider whether it’s a good idea for anybody to invest in property at the minute. 


How Healthy Are Your Finances?

When your first investment is going well, it’s easy to fall into the trap of thinking that you should buy another property straight away and double your investment. But it doesn’t work that way because you’re also going to increase your costs a lot. If you expand too quickly, you will stretch your finances too thin, so do a financial audit first. Look at how much is in your savings and use a housing loan calculator to work out what you are able to borrow and how much your repayments will be. Then look at your budget and be honest with yourself about whether you can really afford it. Remember, you will have to pay for work on the property and then find tenants, so you’ll be covering that mortgage on your own for a while. Unless you can comfortably afford to do that, it’s not the right time to expand your portfolio. 


Do You Have The Time? 

It’s not just the money you have to consider. Owning properties is time-consuming because you have to deal with the maintenance and finding tenants etc. Adding another property will double the time investment, so consider whether you are really prepared to do that. You can use a property management company to help you but this is an added cost to consider. 


Expanding your portfolio can be a good option, but only if you can afford it, you are willing to put the time in, and the market is favourable. Otherwise, you should consider waiting a while or look at alternative investment options. 


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.


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