10 ways to enhance the asset value of your BTL portfolio

COMMENT: As an investor it’s imperative that you maintain and then enhance your asset value, writes NC Real Estate founder Natasha Collins. You don’t have to be told twice that a drop in value can leave a huge dent in your income and your end-of-year balance sheets. This is why it is vital to spend time reviewing your property portfolio, as without this you will never know if your properties are doing what they should, or whether your lack of review is leaving them firmly stuck in the past. Therefore, assessing how your portfolio is performing (at least once every 12 months) and putting in place a plan to enhance asset value should be a major part of your asset management process. Here are my top 10 opportunities for enhancing asset value and creating a strategy that will increase the performance of your portfolio. Renovate properties to modernise and reduce maintenance costs going forward, therefore increasing the lifecycle of the property. This means lower service charge costs for tenants and an increase in rent due to the better quality of space and the reduction of costs. Regear leases to extend their length and increase the rent where market rents have increased. Assessment here needs to be made as to the cost of breaking current leases versus the increase in income that can be obtained. Redevelop assets to add additional floor space which can be rentalised. Be mindful of the positioning of toilets and plant equipment, making sure these are positioned in the less valuable spaces (ie basements). If you are considering redevelopment it is recommended you do your due diligence on which asset classes possess the highest value on a £/sq m basis and use this to form a plan of how a property can be upgraded. Use local planning policy and approved planning applications to assess whether change of use is feasible (If you are in doubt, get out and look around the area, see what’s there and where there is demand). If redevelopment is not affordable yet the property has opportunity, regear the leases to achieve vacant possession at the same time. Once completed, work on obtaining planning permission to redevelop and sell with planning permission granted. Assess changing technology and how this can assist you. For example, if you know that unit value can be increased by adding parking but you have no space for a ramp system, can you utilise lifts. Or can you use energy efficient schemes, such as solar panels or water recycling, to reduce utility costs. Asset value can fall if you have vacant units, therefore it’s important to limit void periods. For commercial units, trial short-term lettings so that tenants can try out a space and it looks more appealing to other potential tenants when used well. For residential units, make sure they are well presented, dressed and homely so that any potential tenants can get a feel of what it’s like to live there prior to moving in (Hint: Simply having the heating on when doing viewings works wonders). Organisation with key lease events is vital. Make sure to diarise when rent reviews and lease renewals are happening and give yourself ample time to assess the market so that you can negotiate a rent that is in line with market comparables. Make sure your external redecorations are completed and fresh. The roof needs to be water-tight, gutters need to be functional and cleaned through and window frames, doors and any other areas of paintwork need to look in great condition. First impressions count. Finally, make sure you handle any arrears and that all tenants are paid up to date. Not only is this great for you because it maintains your income stream, it also means that if you need to sell, potential buyers don’t have the worry they are buying an asset that has problem tenants. Ultimately when enhancing asset value it starts with maintaining the property well at all times and making sure you are reducing costs and managing the landlord-and-tenant relationship well. From there you should look at external influences, where the market is changing, what opportunities are opening up and any movement in demand for space. A great, yet simple, tool to use is SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Write out the four headings and map exactly what is going on in your portfolio and the external influences that could hamper or increase growth. Use your findings here to create your strategy for asset enhancement. Collins is the founder of NC Real Estates’ Members’ Club, a place for landlords and property investors to build property portfolios that align with their goals. www.ncrealestate.co.uk