How to Build a Property Portfolio – 10 Tips to Grow Your Portfolio Today

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Wondering how to build your property portfolio? Look no further, as this complete guide covers everything you need to know.

Here, you will learn all about property portfolios, as we give you 10 simple and actionable tips you need to make a successful buy-to-let portfolio as a property investor.

So, whether you want to know how to build a property portfolio in the UK, are looking at how to grow a property portfolio, are wondering how to start a property portfolio or want to find a property portfolio for sale UK – we’ve got you covered. 

Keep reading for the 10 tips you need to build a successful property portfolio.

What Is a Property Portfolio?

First things first, before knowing how to build a property portfolio of your own, you need to understand what a property portfolio is. 

In simple terms, a property portfolio is a selection of investment properties owned by a group of people, an individual, or a company. 

Building a property portfolio in the UK means to purchase several buy-to-let investment opportunities to generate a significant return on investment – more so than you would with just one property. 

By purchasing different properties in different areas, investors can still gain rental income and returns from one property if another were to fail in some way. 

Those who want to know how to start building a rental property business and turn their buy-to-let efforts into a full-time career will typically need to own a sizable portfolio of properties. 

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10 Essential Tips For Starting a Property Portfolio

1. Make Sure You’re Financially Ready

Want to know how to finance a property portfolio?

Our first top tip if you want to know how to build a buy-to-let portfolio is to make sure you’re financially ready.

Starting a property portfolio can be expensive, and there are a lot of ongoing costs involved that you need to be aware of.

Currently, in the UK, properties are valued on average at £295,000, according to official Land Registry data.

This is after growing at the fastest rate recorded since 2004, with buyer demand currently twice as high as pre-pandemic levels.

While you can build a buy-to-let portfolio for cheaper, it’s important to realise you could be spending significant funds to start your property portfolio.

You’ll also need to factor in ongoing costs involved with buy-to-let property purchases.

These potentially include:

  • Stamp duty tax
  • Income tax
  • Letting agent fees
  • Maintenance costs
  • Ground rent
  • Capital gains tax
  • Mortgage payments
  • Landlords’ insurance

You can find out more about landlords’ insurance, stamp duty, letting agent fees and other costs involved with UK property investment in our how much money you need to invest in UK property guide.

2. Think About Your Goals

The second step in building a buy-to-let portfolio is to think about your goals.

Your UK property investment goals will outline exactly what you want from your investment.

It’s important to think about your goals, as they will have a direct impact on what investment strategies you choose when you are deciding how to build a property portfolio.

Ask yourself:

  • How quickly do you want to see a return on your buy-to-let portfolio investment?
  • Do you have your eyes on retirement or are you just looking for some extra cash in your pocket?
  • How long do you want to keep your buy-to-let portfolio for?

These questions will help define exactly how you should approach building your property portfolio.

For instance, let’s say you’re planning for retirement, and are willing to keep your investment funds locked away for 10 years or more.

If that’s you, then starting a property portfolio with residential property is a smart choice as these properties historically see the biggest levels of capital growth. This sort of strategy would be called a growth-focused strategy.

On the other hand, if you’re looking for a short-term income-focused strategy, then student accommodation may be ideal for you, which has limited capital growth potential but significant returns available.

Before you begin building a property portfolio in the UK and purchase your first property, you should take some time to think about your investment goals and your preferred investment strategies.

3. Do Your Research Into the Best Buy to Let Areas

The third step in learning how to build a property portfolio is to conduct market research to find out where you should invest.

Not all UK property investment areas are built equally for investments, with huge regional variations in price, growth potential, rental demand and more.

This is one of the most essential tips for how to build a property portfolio successfully.

When researching an area, you’ll need to consider several factors. They include:

  • Affordability
  • Monthly rent
  • Rental yields and rental returns
  • House price growth potential
  • A young population with high rental demand

If a city meets all these criteria, it is likely one of the best places you can start building property portfolios.

For our money, the current best places to start a buy-to-let portfolio in the UK are the Manchester and Liverpool property investment markets.

According to Savills, both cities are set to see house prices rise by 11.7% by 2027 – the highest predicted growth in the UK.

They also have some of the highest rental returns in the UK, with a thriving rental market perfect for diversifying your property portfolio.

To learn all about the best places to invest in property and where you should build a property portfolio UK, we have a full top 10 guide to help you.

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4. Start Small and Expand Your Portfolio Cautiously

Ever heard the phrase “you should walk before you run?”

While this mantra can help in many aspects of life, it’s also true when building a property portfolio.

While it can be tempting to start building your portfolio right away, especially when there are so many great investment opportunities on the market right now, it’s better to start slowly when building a buy-to-let property portfolio.  

If you’re looking for tips on the best way to build a property portfolio from nothing, starting small with one or two solid investments is a good way to start building up your portfolio.  

By starting with a single property, you can start earning returns and familiarise yourself with the world of UK property investing.

Then after a while, you can branch out and potentially reinvest your earnings into another asset.

Don’t rush and look to expand your portfolio quickly and buy multiple properties. Instead, take your time to avoid getting into debt and make sure you can afford to grow your portfolio.

This way, if something goes wrong, you are at less risk than if you were to invest in multiple properties at once, so your finances are safer this way.

If you’re ever in doubt, always be sure to seek financial advice from property experts or financial advisors before you start investing.

5. Think About Your Tenants

One of the most important things that property investors often forget to focus on when buying property is their target tenant.  

It’s easy to get wrapped up in property marketing and running your buy-to-let property so that you can forget about the people who will be living in your portfolio property – the tenants. 

Keeping your tenants happy is essential, as this means you’re less likely to experience void periods and can keep a steady cash flow of rental income.  

Choosing the right tenants is important to help build a successful rental property portfolio and property empire. You need to know what drives your tenants, so you can provide multiple properties that generate interest.

In the aftermath of the COVID-19 lockdowns, tenant demand has changed a lot as they now look for different facilities when selecting a property, according to Benham and Reeves.

With more people working from home or in a hybrid schedule, people now want fast broadband and outside space as their most important factors in choosing rental property.

New builds are also highly popular with younger tenants, and so aiming to add new build properties to your portfolio is a good way to have high tenant demand, 

Be sure to target properties with these high-importance characteristics to ensure tenant demand – particularly if you’re buying apartments to rent to young professionals.

6. Remember to Diversify

The best investment strategies look at creating property portfolios that include several different investment strategies.

By investing in just one type of property, you’re limiting your investment portfolio potential and making yourself more susceptible to failure.  

Property portfolio diversification means spreading your risk across several different ventures, which is vital when building a portfolio of investment properties and keeping the cash flowing.

Say your portfolio was filled with multiple student accommodation properties in the city centre of one city – if the market trends slowed in this area, your entire property portfolio would suffer. 

You can diversify your property portfolio in two ways.

  1. Choose a different type of property – for example buying both student accommodation and residential property, or buying flats as well as houses.
  2. Invest in different areas – one property portfolio example could be investing in different cities like Liverpool, Manchester, and Birmingham.

If you’re serious about learning how to grow a property investment portfolio, diversification is one of the key elements to consider for the best return on investment.

This way even if one investment proves to be unsuccessful, you will still be able to profit off the other investments in your portfolio, protecting your finances against potential struggles in the future.

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7. Choose a Hands-off Investment

Many people assume when building a property portfolio that you will have to take on a lot more responsibility as a landlord.

A landlord’s job can be hectic, with pressures with finding tenants, managing your property, and dealing with any issues your tenants are struggling with.

This is especially true for those already working full-time and looking to use their property portfolio to generate income.

Thankfully, you can have a full hands-off investment when starting a buy-to-let portfolio by hiring a property management company.  

Enlisting a property management company will add to your expenses, but is often crucial if you don’t personally have the time to meet the demands of running a property portfolio.   

These companies are a key part of a hands-off property investment strategy as they will deal with all landlord responsibilities and will be the first contact for your tenants.

This will eat into your profits a small amount but the hassle it will save you will more than make up for it, and it allows you to earn more income through other streams rather than being a full-time landlord.

If you want to expand your portfolio and build a property empire while still maintaining a full-time career, then hands-off investing is your best option.

8. Have a Long-Term Plan and an Exit Strategy

One of the most important aspects of building a property portfolio, and UK property investment in general, is to have an exit strategy.  

An exit strategy looks at the end result of each investment, considering what to do when it comes to selling your property.  

Your goals will tie into this as if you’re investing as a way to build an attractive retirement fund, you’ll want to generate as much rental income as you can before selling at the right time.  

As well as this, selling a property takes time due to property being a physical asset. If you want to sell your investment you need to be patient to secure the most value from your property.

Property is a long-term investment, and you cannot quickly dump your investments if you are in financial trouble, so you should have a plan prepared ahead of time.

By researching rental market trends and considering property price predictions, you can get a sense of the best time to sell your investment property for optimum gain.

9. Consider Buying Off-Plan Property

Whether you want to know how to build a property portfolio with £50k, or how to get a property portfolio with £20k, likely the best way of building a portfolio on a budget is by buying off-plan property.

Simply put, off-plan properties are new-build properties that can be purchased while still in development.

There are several strong reasons why buying off-plan property is so ideal for investors in 2022.

They are:

  1. As an incentive to invest, off-plan properties are usually offered significantly below market value.
  2. Thanks to the lower prices, off-plan properties usually grow in value upon completion.
  3. Off-plan properties allow investors to invest early and cherry-pick the best units in a development.

Of course, if you do choose to buy off the plan, you need to do ample due diligence to ensure the developer is reliable and the property will be of high quality.

Off-plan properties can be riskier due to the fact that there could be issues with the development and building, so ensuring the developer is of a high standard is important.

To learn more about buying an off-plan property, be sure to check out our ultimate off-plan property guide.

10. Avoid Buy to Let Mortgages If You Can Afford It

If you’re looking at how to build an investment property portfolio for 20k or have a low budget, you’re likely considering a buy-to-let mortgage.

While this is a popular decision amongst landlords, one of our top tips is to avoid buy-to-let mortgages if you’re a cash buyer and can afford it – particularly if you’re planning for retirement.

The reason we say this is that BTL mortgages work slightly differently from typical residential mortgages.

Aside from the fact that BTL mortgages require a larger deposit (usually around 25%), they are also interest-only.

This means that every month, mortgage payments will only cover the interest without touching the overall debt.

Then come to the end of the mortgage term, you will have to pay off the total debt, whether that be by remortgaging or selling your properties to cover the debt.

Naturally, if you’re planning for retirement and want to make a profit on your property, you will unlikely want to be forced to use your sale to cover the cost of the mortgage payments.

You can get mortgage relief if you really need to use mortgages, but you may require forming a limited company to get the best returns.

You will also find it harder to get a BTL mortgage if you are purchasing an off-plan property, due to the added risks that come with buying off-plan.

You can learn more about buy-to-let mortgages and forming a limited company in our buy-to-let tax investment guides.

FAQ’s

There’s no real benchmark as to how many properties are classed as a portfolio of investment properties. 

Many investors who own just two properties can consider themselves as owning an investment property portfolio.  

In mortgage terms, those who own four or more mortgaged properties are classed as portfolio landlords.  

Wondering how to buy more than one investment property and how many properties you’ll need to make money?

The number of properties you would need in your property investment portfolio to make money depends on the amount of money you hope to make.  

The more money you want to make from investing, the larger your property portfolio should be.  

As an example, let’s say you set yourself a goal of making an average of £30,000 in profit per year from owning rental properties. 

You would ideally need to own five rental properties that generated a profit of at least £600 per month, or four properties that profited at least £700 per month in rental returns. 

This will take time and money to build up, but once you have established a sizeable portfolio then you will see considerable profit coming in every year through rental income.

If you want to purchase multiple properties at once, read our guide on how to buy more investment properties.

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Property Portfolio Example: Property Portfolio for Sale With RWinvest

We hope you’ve enjoyed our guide to building a property portfolio in the UK.

If you’re interested in investing in property and want to see what an example property portfolio could look like with a property investment company like RWinvest, then this section is for you.

RWinvest is an award-winning property investment company with over 17 years of experience in residential and student property.

We currently have some fantastic available properties for every price point, meaning you can help build your portfolio with us at an affordable price.

Whether you want to know how to build a property portfolio with £50k or how to build a property portfolio with 20k, the following properties are perfect for you.

They include:

If you want to learn more about investing in any of these areas, you can read our detailed guides to learn more.

Our guides include Manchester property investment, Birmingham property investment, and Luton property investment.

John Brady

John Brady

John is a property writer here at RWinvest. With a close eye on property market news and updates, John writes detailed and informative articles on a range of topics that are helpful for anybody looking to invest in UK property.

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