How to Build a Profitable Property Portfolio

By Kilundo Mbithi

As more and more people look for better ways to secure their financial future other than investing in stocks and shares, so interest in purchasing real property as an investment asset is increasing. After all, carefully invested real estate rarely loses money whereas all too often investments made into pension schemes or on the stock market fail to come to fruition.  It’s no wonder then that more people want to know how to build a profitable property portfolio?

Here are seven tips that expert property investors abide by when looking for property that they can up-sell or rent out for profit…

#1. Analysis

Speak to agents and do your own research, find out how much rent you think you can comfortably get from a given property type in a given location.  With that figure in mind, never pay over 100 times more than the monthly rental cash flow for a property.  i.e., if you’re estimate that a property will return you KES 50,000 a month do not pay more than KES 5,000,000 for that property for you to achieve a good rental yield.

#2. Other People’s Money

Understand and harness the power of OPM – other people’s money!  Sage investors have for long lamented the risk of putting your eggs in one basket. Similarly it is never advisable to commit 100% of your own personal wealth to purely invest in property. Instead try to balance your own little input with other credit facilities at your disposal. In a nutshell, don’t expose yourself too much.

#3.  Don’t Buy the Future

Don’t invest in future potential, invest in real potential.  If an area is considered to be coming up because in the future it will benefit from better infrastructure never bank on the investment being made…just know that if an area has already arrived and a particular property is already profitable, the future prospects for that property are already assured and make a far better bet than speculating to hopefully, maybe, potentially one day accumulate!  Speculators are ‘investors’ high on what I call “hopium”.

#4.  Cut of Any Emotional Attachments

Don’t make it personal – an investment is a purely objective profit making activity, therefore, don’t get emotionally attached to any particular property, or a seller of a property. Remain as objective as possible. As an investor, perhaps you should learn to see buildings as nothing more than a mass of concrete, metal and glass subject to profit or loss.

#5.  Learn Constantly

Learn all you can from the wealth of brilliant books that have been published by property investors and real estate advisors.  You can bet your bottom dollar that there is something to be learned from someone who has been doing it for decades.  This will significantly reduce your learning curve that is often than not going to take you a couple of years and possibly loses here and there. As it is said, a wise person learns from his owns mistakes but a really smart person learns from his mistakes and those of others.

#6.  Research, Research, and Research Some More

Do hands on research – get out on the streets, visit letting agents and estate agents, look at property prices, rental rates, the popularity of a given area and only when you are certain about a location and a property type should you make a commitment to buy real estate.

#7.  Action

If you do your homework, keep revising your facts and figures you should be confident in your own decisions. Do not be swayed by others who might say your plans will never work.  You have to have dreams and ambitions and visualize all your hopes and hard work coming to fruition.  Keep your feet on the ground and don’t be swayed by the negativity and limitation of others.

The Author is a Valuer & Registered Estate Agent and runs an investor education & coaching program at www.investorclinics.com

SHARE