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13th Jul 2022|BTR & Asset Management|

Transforming Dilapidated Portfolios

Whether you’re a seasoned investor or considering expanding your portfolio, it’s important to understand what makes your property portfolio tick. Being able to dissect your portfolio and understand where improvements can be made is the best way to ensure that your properties are reaching their fullest potential. However, if your property portfolio has fallen into a state of disarray and is experiencing declining interest, increasing void periods and is not achieving its market value, you may have to consider completely transforming your dilapidated portfolio.

Today, Centrick will be running you through everything you need to know about transforming your dilapidated portfolio. From identifying the signs of dilapidation, to understanding why profits plummet and the value of an asset manager, here’s Centrick’s take:

 

What is a dilapidated portfolio?

A dilapidated portfolio is a set of properties that are not performing in a manner that provides you a sufficient return on investment. The term is rather subjective, and depends on factors such as the state of the economy, the health of the property market, and your track-history with investment.

 

What causes portfolio dilapidation?

There are more than a few reasons as to why your portfolio may be underperforming. Firstly, your properties may be suffering from physical dilapidation in the form of aging or poor maintenance. These issues may be exacerbated by inadequate property management which makes tenants feel unheard and contributes to anger regarding unkempt communal spaces and long-term unanswered maintenance issues.

Similarly, the appeal of your property to potential tenants will wane if the communal amenities are inaccessible or inadequate. For example, the closure of gym facilities for prolonged periods of time may result in your tenants requesting a reduction in rent that makes your property less profitable. In the same vein, issues in the broader vicinity of your property, such as increasing crime rates or noisy construction work, can dampen the appeal of your property and even reduce its market value. The aforementioned reasons will likely culminate in void periods, which are when you receive no income from your property as it is unoccupied.

Beyond the physical features of your property, external factors will also impact your portfolio. Negative price trends in the area will also impact the appeal of your property, thus affecting tenant demand. This could be from stagnation across the area, increased crime, school closures, inadequate transport links, or simply the appeal of a nearby location that is displacing interest in your area. Anything that makes your neighbourhood seem inconvenient for commuters, unsafe or poor value for money will impact its appeal.

 

How do I get my dilapidated portfolio back on track?

If you have concerns about the health of your property portfolio, there are two main ways to get back on track.

If you are struggling to find tenants due to physical or cosmetic issues, the first option is to attempt to correct the dilapidated aspects of your property portfolio by making it a profitable investment. Many portfolio landlords enlist the help of a managing agent such as Centrick to aid them in pinpointing what parts of their existing processes are unproductive and inhibiting their ability to turn a substantial profit. The second option is to sell the units that you own and recoup as much money as you can, thereby releasing you from your dilapidated investment. However, you must be very cautious when executing an exit strategy for your dilapidated properties. Making rash decisions and not analysing the market alongside an expert could leave you at risk of selling a property that could easily have been made profitable. It may be worth switching agent if you are not receiving much interest in your property, or revaluating your marketing strategy to optimise its appeal. What’s more, market conditions fluctuate often, meaning that it may be worth holding off on selling if your agent believes a market upsurge is due. You will also have to weigh up the costs of selling dilapidated properties, as retaining them in your portfolio may be more cost-effective for you once selling and solicitors fees have been considered.

 

What is an Asset Manager?

Whereas a property manager will focus on the daily running of your properties – from referencing checks on new tenants, to arranging maintenance checks – an asset manager takes on an entirely different set of responsibilities. Asset management considers the financial implications of your portfolio by analysing the income and outgoings from your properties and assessing ways to increase your profits. This involves strategizing how to reduce and even eliminate void periods, analysing the market value of your properties to determine whether now is a good time to sell your units, and considering the best opportunities for rent increases. They also have the knowledge to guide you in your next purchase by offering expert advice, recommending up-and-coming locations, and by recommending properties that optimise your portfolio’s diversity, thus making it as stable as possible. Asset managers may not substitute the role of your accountant, but they certainly can help you understand your cash flow and make positive changes to transform your dilapidated portfolio.

 

Concerned about the health of your dilapidated portfolio? Get a check up!

Centrick can help institutional investors, freehold owners and portfolio landlords to enhance the return from their portfolio. Our experienced Asset Management team can help clients with any size portfolio to maximise their investments. Whether you’re looking for a brief insight into the market value of your portfolio or wish to hand over your portfolio to a team of experts whilst you tackle other business ventures, Centrick has an option for you.

Our team are experts in residential and commercial property, meaning that we can advise those with complex mixed-use portfolios. We can perform detailed financial stress tests to determine the strength of your current investments, project your returns, and provide advice and guidance for your next investment. Contact our team using the form below or get in touch with your local Centrick branch today to see just how much potential your portfolio has.

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