How to Build a Property Portfolio – Grow Your Portfolio Today

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 that are 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 with the aim of generating 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 was 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.  

How to Build a Buy to Let 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 £255,535, 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. 

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 they 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 more 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 on 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 28.0% by 2025 – 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. 

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 how to build a property portfolio from nothing, starting small with one or two solid investments is a good way to start to build 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 growing your portfolio. 

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 that you can forget about the people who will actually 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. 

Due to 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, people now want fast broadband and outside space as their most important factors in choosing rental property.  

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 a number of 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. 
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. 

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. 

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.   

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 build 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 2021. 

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 a high quality. 

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

Want to Find Out About Our Current Investment Deals? Have a Question About Property Investment?  

Chat to One of Our Agents Today With Our Live Chat Service