Buying or Selling a Portfolio?

Hello and thanks for joining me again, I hope 2021 is treating everyone well.

I thought for this blog I may have a look at selling and buying a portfolio of properties. Now, in the interests of full disclosure, what has prompted this topic this month? We have been speaking to a couple of landlords who are considering selling their property portfolios. It struck me that it’s probably something people may not be comfortable with or done before. With us hopefully having portfolio sales on the horizon, what better time to cover that than in this month’s blog?

So, at the risk of stating the obvious, what is a portfolio? Basically, a portfolio is multiple properties owned by the same person. If an investor decides to sell their portfolio, they benefit from the convenience of selling multiple properties at once and hopefully obtain a quick pain free sale. With this kind of sale Home Reports aren’t required so can be a great saving for the seller as well. There may also be a saving on legal fees by rolling them up into one sale.

That is the benefit for the seller, but if you are a buyer, why look at a portfolio? There is a number of benefits to it but the first and most obvious one is that if you’ve got ambitions to grow a portfolio yourself, this a terrific way to do it quickly and in one swoop. Drilling down a bit further than that though, there are more benefits that can make it an attractive proposition. How many people are looking to buy a portfolio compared to people looking to buy individual flats? Chances are you will have a lot less competition. If you are competing with less people for a portfolio this impacts on the price and there can be great deals to be had. On top of that, did you know that buying a portfolio of 6 properties means you don’t need to pay the additional property tax? That can be a hugely significant saving. As always please consult a qualified professional for tax advice for the finer details.
Not everyone who buys a portfolio is doing it with a view to keeping them long term though. If you manage to pick up a portfolio for below market value, then that’s terrific news. A very common tactic would be to break up the portfolio and sell them off individually for market value. Even a relatively small profit on each one spread over multiple properties can offer a lucrative return. You may decide to break up the portfolio and sell a couple and keep some so you get the best of both worlds. It’s now your portfolio so you can do as you please with them!

I think that is most of the benefits covered. What else should you be aware of? When buying a portfolio, it is essentially classed as buying a business, therefore the sellers don’t need to provide home reports. If you are the seller and you have got multiple properties to sell, getting numerous home reports could be a hugely significant cost. Anyway, back to the buying process, you don’t have a home report, you’ll need to see inside the properties, right? Not necessarily. Vendors may not want their tenants to know their flat is being sold so don’t want to disrupt their tenants by having multiple people going in and out their house. I know if I was a tenant, I wouldn’t be keen on this, especially with the current climate surrounding covid-19. It doesn’t mean they’ve got something to hide, in fact it’s entirely reasonable to me.
The way I look at it, it doesn’t really matter what colour the walls are painted or if the tenant is untidy, it’s the numbers that you need to know. The numbers are what is going to be the key factor when deciding whether the portfolio is good value or not. How much are the properties worth individually? How much is the rent? Is the rent up to date? What is the yield? What are the savings by buying in bulk? If looking at buying a portfolio, tenanted or otherwise, that is the questions you need to be asking rather than the cosmetic stuff that you would normally be interested in when buying individual flats.

I think that covers portfolio sales for now. I hope you found it of some use.
I mentioned it earlier, however we are hopefully going to be bringing a couple of portfolios to the market this month so keep your eyes peeled on our social media pages and website www.greendoorpropertyauctions.co.uk for more info.
If you have got any questions, if you want to discuss anything I’ve raised or want me to cover anything else in a future blog then just let me know. It would be great to hear from you. For a chat you will get me on 0131 322 8550 or by email at craig@greendoorpropertyauctions.co.uk.

All the best and thanks again for taking the time to read this blog. As always, Likes, Retweets and shares all appreciated.

Craig