Creative Ways to expand your portfolio

Expanding your Portfolio.

In my experience, investors potentially suffer from two conundrums, namely they often struggle to find suitable properties to buy and secondly only have a finite amount of funds available to expand their portfolio. It is for these reasons that most serious investors eventually develop some creative strategies to overcome these two scenarios.

Early on in your investment career I suspect you relied on the internet portals to identify suitable properties and as your experience increased you will have doubtless forged relationships with local Estate Agents to try and be notified of suitable properties as soon as they hit the market. Such a strategy can work fine but you may wish to be a little more creative than that.

One property search strategy to consider is what is often called “Direct to Vendor”. This in essence means contacting a property owner directly to see if they wish to sell and avoid the competition of other buyers who would appear if the property went on the open market. If you identify a suitable property, you can, for as little as £3, search the Land Registry database to find details of the Owner. You can then approach them and see if they would consider a sale. Understandably the hit rate will likely be fairly low but one or two properties a year will make the efforts truly worthwhile.

Another option worthy of consideration is approaching housebuilders shortly before their financial year end to see if they have any units that they are obliged to dispose of before their financial year ends. If you can work to a strict timescale then you may well be able to negotiate a discount. This is a particularly useful strategy on larger sites with phased development as typically the release of the second and subsequent phases of a development are priced more highly and so if you secured a discounted unit as part of the initial phase you could win in two ways.

Another identification method could be to use some of the mapping software available to identify potential building plots. Houses with large gardens, corner plots and infill sites could all be lucrative building plots if you can identify the Owners and convince them to sell.

A further method you could consider is to develop a chain break service which you could offer to local estate agents. In essence it means that you will purchase a property to provide an end to a chain of property transactions allowing all in the chain to be able to move. As well as being viewed as the saviour of the chain of sales, you may be able to secure the property at a discount with the various members of the chain contributing just to enable the transactions to proceed.

In considering financing acquisitions you may wish to consider some alternative strategies which reduce the amount of money you need to put into each property and hence give yourself the chance to purchase more units.

Lease Options work on the basis that you agree to purchase a property at some time in the future and in the interim pay a rental sum to the seller. The upside is that you get to control a property without using much money and also get the chance to lock in the purchase price at todays prices. This could pay dividends if you are not obliged to purchase the property for another five years. The benefit for the seller is that they can almost immediately move on rather than going through a potentially protracted conveyancing process.

Another method, which has been used by many property investors, is assisted selling. Ideal for those who enjoy the Buy, refurbish and re-sell strategy as it removes the need for funding the purchase price and also avoids costs such as conveyancing and stamp duty. In essence you pay to refurbish the sellers property and upon its ultimate sale you will hopefully get the return of the refurbishment monies as well as a share of the uplift in value.

A final option for your consideration is Vendor finance where the seller effectively finances your purchase by charging you interest on the equity they have in the property. This could be useful for a seller in the current low interest rate environment providing them with a greater return than would be available leaving the funds on deposit.

I urge you to consider some “outside the box” thinking in terms of expanding your portfolio. Done right, it will allow you to grow much more quickly than would be the case if you have to continue to use the traditional search and funding methods of property acquisition.