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Level of risk


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I am currently purchasing our 10th property. We have been investing for 7 years. Last year we completed on a new build project for 2 maisonettes. We currently have one property waiting for planning to build 6 luxury flats and are purchasing another property with a JV that will go for planning to build another 2 luxury flats on the side. We have just been provided with the name of a potential investor to JV again with and I have a property in mind. However, having been stung with negative equity in the 90's crash im wary of the speed of escalation of our business. Most of our properties are 75% mortgaged, although this will change significantly when the 6 flats are sold. Can anyone offer any advice on how to reduce the level of risk while still maintaining growth?

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Its a nice problem to have! I've never had a business or portfolio big enough to have a similar problem. 

Unfortunately, there is usually a correlation between risk and return. From a theoretical point of view, some ideas:

Restructuring your activities and focus on those activities where you generate most value

Diversify your activities - do what you have been doing but build a furnished holiday lettings business rather than a straightforward BTL portfolio; do what you have been doing but for other people and charge them a fee for doing so; train / mentor other people to do what you have done and charge a fee;

Reduce the size of your projects, but do more of them

Reduce the size of your portfolio - sell some of the properties that are not performing as well, where you expect to see least returnsDiversify your portfolio: areas (within UK), countries, types (HMO, furnished holiday accommodation, professional  

Split your activities and portfolio into more ltd companies - not sure if you have directors guarantees;

De-gear;

Diversify your funding so that you are not reliant on just one or a small number of lenders

Extend the tenor and amount of the fixed element of your funding

Transfer risk by pre-selling some of your units

Transfer risk through JV

Transfer risk through diversification of your shareholder base

Derivatives   

...

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I’m def not an expert but from reading on the hub seems wise to keep a really healthy cash buffer! If you can cover mortgage payments it buys you time to do a couple of emergency discounted sales if the market crashed ... and totally agree diversify ! And stress test your interest costs vs outgoings at different levels to know where your risk point is? , great problem to have though! 

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