Modelling your property portfolio growth – is 5% annual growth reasonable?

by Readers Question

4 years ago

Modelling your property portfolio growth – is 5% annual growth reasonable?

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Modelling your property portfolio growth – is 5% annual growth reasonable?

I’m relatively new to property investing, having become an accidental landlord 6 months after buying my first property in 2006. I now have 3 properties, the last of which was the first purpose bought investment (#2 was my wifes flat which we’ve kept). Modelling your property portfolio growth - is 5% annual growth reasonable

I am very goal driven, so I’ve had a go at forecasting various scenarios for expanding my fledgling property empire so I can get a picture of when I will be able to ‘retire’ from my day job and be a full time property investor / vagabond:). The question is; what assumption would you build in for the average annual growth in your property portfolio value over this period of time?

At the moment I’ve done a ‘worst case’ scenario of 3%, and a medium case of 5% per property. Two of the properties are in London (South, and South West), and one is in Bristol. The portfolio is worth around £700k.

Based on the 5% model, I’ll be able to acquire another 2 properties by 2022, which I hope is realistic. It will also allow me to reach my early retirement goal of retiring before I’m 45! 🙂

Regards

Marius (HK)



Comments

Mark Alexander

4 years ago

Hi Marius

I think the range that you are looking at is very sensible given historic economic performance and the uncharted waters that we are now in.

My advice is plan for the worst and hope for the best.

Remember to factor in serviceability and break-even. Our landlords calculator should help to to gain a better understanding of how to build this into your modelling - see >>> http://www.property118.com/calculating-rental-yields-and-returns/
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Mick Roberts

4 years ago

I shouldn’t laugh, very goal driven, but only buying 3 properties since 2006 to now?
And another 2 properties by 2022? Sorry, it’s not my style, I thought I’d have some sense of humour for a change.

I’m gonna’ regret posting this. As we don't normally have a dig at each other on this public very good site. I could create a debate though, eh.

I apologise Mark, you can give me my first public telling off.

But retiring before 45, will be doing better than me, I’ll still probably be dipping my toes in at 75.

Paul Shears

4 years ago

Would I be right in thinking that you are using the day job to minimise leverage to give you maximum disposable income from the properties but with few houses to manage?

Mark Alexander

4 years ago

Reply to the comment left by "Mick Roberts" at "23/10/2014 - 19:23":

Hare vs Tortoise Mick? I purchased my first in 1989, second in 1996 and then went on a buying spree in 2000 when I started making really good money and another in 2004 when I was able to release a load of cash from refinancing. I retired from the rat race of financial services at the age of 41 in 2009.
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Colin Dartnell

4 years ago

Hi Marius,

Retire at 45, why?

Get away from everyday stress yes go for that but retire no way, if you get the property bug you will find it is too much fun.

Without knowing your circumstances, look up what Mark and Neil are saying about equity finance, and if you are able, put it on top of a current mortgage you may have to give you a deposit for the next property, then get a mortgage you can fix for five years at good rates with the likes of Virgin Money if you want the security on the new purchase. That way you could get another property straight away instead of waiting. Just be aware that you will need to pay it back in ten years.

Oh, and I bought my first property in ’94 and the second in ’99 then in 2000 it got a lot more interesting. I had never heard of cash is king then I thought cash was another deposit 🙂

Marius HK

4 years ago

Hi Mick,
Fair comment, however it wasn't until 2013 that I made the decision to get actively into property investing, which resulted in the equity release and new property this year.

Even so, with low growth it'll be a number if years before I can fund the next property through portfolio growth, unless I look into Equity finance (I admit the prospect makes me a bit nervous for some reason).

Marius HK

4 years ago

Reply to the comment left by "Paul Shears" at "23/10/2014 - 19:50":

I leave my personal finances (ie day job) completely separate from the properties and their income, as I don't want to use the properties to fun any lifestyle demands until I am a bit further down the road.

As for retiring at 45, it's just to buy myself the freedom of being able to pursue life and business outside of the rat race! I enjoy the startup scene and have had a go at setting up a couple of ventures, none of which have succeeded. When I 'retire' I will use property income to replace my current income so that I'm free to pursue my entrepreneurial goals without impacting on family or lifestyle options.

I'll start reading up some more on this equity financing, sounds like a good in principle. My options may be limited though as I live abroad.

Mick Roberts

4 years ago

As u know Mark, me same as u, first in 1989, then similar to u, 1997 the rest onwards. Stopped in 2004. Then 2008 couldn’t refuse what the agents were offering me.
Stopped again in 2009 roughly, then 2014, instead of slowing down, gone a bit silly buying more, but more upmarket stuff. I say upmarket, but they’d be your lower ones ha ha.

Mick Roberts

4 years ago

Oops sorry Marius, missed your comments, just email linked straight into the bottom

Yes, listen to the guys on here, get some leverage going. You don’t wanna’ kick yourself in 2022 when someone sits down with u & says ‘Well if you’d have borrowed this & that', u could have had 55 properties’-And hassle & trouble ha ha.

Mark Alexander

4 years ago

Reply to the comment left by "Marius " at "24/10/2014 - 06:27":

Hi Marius

Where do you live?

More on equity finance here >>> http://www.property118.com/85-percent-ltv-buy-to-let/69350/
.

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