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Wondering how to build a property portfolio? Well, you’ve come to the right place!
Whether you want to know how to build a property portfolio from nothing or are looking to add to your existing assets, this guide offers expert advice for developing a lucrative and long-lasting property portfolio.
Before giving you 10 simple and actionable steps for building a buy-to-let portfolio, we’ll take you through the very basics of property portfolios and what it takes to become a successful property investor.
So, if you want to know how to build a property portfolio in the UK, are wondering how to start from scratch, or want to find a functional property portfolio for sale UK – we’ve got you covered.
We’ll even look at a brief property portfolio example with some important insights into the current buy-to-let market to help you on your way.
FAQs addressed through this 10-step guide:
So, keep reading for 10 essential steps to building a successful and long-lasting property portfolio.
Before building a successful property portfolio, you need to understand what exactly this is as well as the steps and finances typical of the investment process.
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 purchasing 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 a variety of areas, investors can ensure steady returns through a rental income from one property even if another is without a tenant or enduring challenging market conditions.
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.
Importantly, when starting a property portfolio, the buy-to-let market is often the best place to begin as the income you make from your first rental property can provide you with the means to invest in another.
This will kickstart your journey to building a property portfolio that is diverse and versatile enough to withstand difficult market circumstances and bring you lucrative, long-term returns.
By submitting your details you agree to allow RWinvest to store and process the information submitted and receive product information and other communication, as stated in the privacy policy.
By submitting your details you agree to allow RWinvest to store and process the information submitted and receive product information and other communication, as stated in the privacy policy.
How to build a property portfolio in 10 steps:
1.) Make Sure You’re Financially Ready
2.) Identify Your Goals
3.) Research the Best Property Investment Areas
4.) Start Small & Expand with Your Earnings
5.) Know Your Target Tenants
6.) Diversify Your Portfolio
7.) Choose Hands-Off Investment
8.) Have an Exit Strategy
9.) Invest in Off-Plan Property
10.) Avoid Buy to Let Mortgages where Possible
So what amount of money does it take to build a property portfolio and how much can be earned?
Understandably, when considering how to build a buy-to-let portfolio, it’s essential to ensure that you’re financially ready to make your first purchase.
This may seem self-explanatory, but many people end up in serious financial difficulty, swamped with repayments after trying to build a property portfolio too quickly and with insufficient funds.
Starting a property portfolio can be expensive, and there are a lot of ongoing costs involved that you need to be aware of.
In the UK, properties are currently valued at an average of around £288,000, according to the latest UK House Price Index. When building a property portfolio, however, there are ways to manage and mitigate costs.
These include investing in off-plan property and more affordable buy to let areas, which are both discussed later in this blog.
For examples of buy to let property prices in key UK markets click the link or simply scroll to the bottom of the page.
Keeping an eye on current market values and future forecasts is essential when considering how to build a property portfolio and deciding when is the best time to invest based on personal financial circumstances.
Following a brief decline in property values this year, for instance, Savills predict prices to rise by an average of 6.2% over the next five years. This means 2023 could present a unique opportunity to make an investment for below-market value before property prices increase significantly.
While building a property portfolio can become more affordable as you begin earning rental incomes from multiple properties, it’s important to realise you could be spending significant funds to start your property portfolio.
Therefore, it’s important to take the time to come up with an affordable and sustainable property strategy when it comes to your investment decisions.
You’ll also need to factor in ongoing costs involved with buy-to-let property purchases.
These may include:
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.
Property is also subject to various regulations, which can see new developments or proposals that could affect your budget.
For example, the introduction of new EPC regulations in 2023 has seen developers and landlords incorporating efficient, energy-saving technologies into their plans in order to ensure that they don’t incur any fines or lose their ability to earn rental income from their properties.
You can find out more about EPC ratings and how to future-proof your property in this article: ‘What do investors need to know about energy efficiency?’
The second step in building a buy-to-let portfolio is to clearly identify your goals and determine what type of investor you want to be.
In the majority of cases, investors will use the returns they receive from property to support their primary income or they will build an extensive portfolio, the management of which will become their main occupation.
Your UK property investment goals will outline exactly what you want from your investment and in turn, how to go about starting a property portfolio.
There are many ways to enter the buy-to-let market and build your portfolio, but the route you take will depend on your goals and financial circumstances.
For example, looking at tenanted properties for sale can make a great investment and provide a high-earning passive income, but having multiple tenanted properties can be costly and difficult to manage.
Therefore, it’s important to have clearly defined goals, as they will have a direct impact on what investment strategies you choose.
So, when you are deciding how to build a property portfolio ask yourself:
These questions are an essential starting point for building your property portfolio and the type of properties you choose to invest in.
For instance, if you’re planning for retirement and are willing to keep your investment funds locked away for 10 years or more, starting a property portfolio with residential properties is a smart choice as historically, these properties see the biggest levels of capital growth.
This is a growth-focused strategy and is traditionally one of the most assured and lucrative methods when it comes to building a property portfolio.
On the other hand, if you’re looking for a short-term income-focused strategy, then student investment property may be ideal for you, as it provides regular and steady rental returns.
In short, before you begin building a portfolio in the UK and purchase your first property, you should take some time to think about your goals and the investment strategies that work best for you.
The third step in determining how to build a property portfolio is knowing where to invest.
Importantly, not all UK property investment areas are the same, with huge regional variations in price, growth potential, rental demand and more, making this one of the most essential steps in terms of how to build a property portfolio successfully.
When building a property portfolio then, you should always research the best investment areas before making a purchase, keeping the following factors in mind:
If an area meets all these criteria, it is likely one of the best places to start building a property portfolio.
In terms of value for money when building a property portfolio UK markets that investors should seriously consider in 2023 include the Manchester and Liverpool property investment markets of the North West.
According to Savills, both cities are set to see house prices increase by around 11.7% by 2027 – the highest predicted growth in the UK, making them two of the most promising areas to build a property portfolio in terms of capital growth.
They also have some of the highest rental returns in the country, a key point to consider when strengthening, diversifying and successfully building a property portfolio UK.
To learn all about the best places to invest in property and where you should build a property portfolio in the UK, we have a full top 10 guide to help you.
But for now, here are some key UK investment areas to consider:
Being able to walk before you can run is particularly true of property investment and building a property portfolio that can withstand market challenges and won’t jeopardise your finances.
It can certainly be tempting to start expanding your portfolio right away, especially when there are so many great investment opportunities on the market right now, but starting slowly when building a buy-to-let property portfolio is a much more efficient long-term plan.
In this sense, starting a property portfolio with one or two solid investments is a good initial strategy.
This will allow you to start earning returns while familiarising yourself with the world of UK property investing.
Then after a while, you can branch out and potentially reinvest your earnings into another asset and start slowly developing your property portfolio.
The main thing is not to rush and look to expand your portfolio quickly by buying multiple properties without first learning the ropes. This can backfire significantly when not careful and it’s not the recommended way to start building a property portfolio.
Instead, take your time, avoid getting into debt or being forced to refinance a property, and develop a good investment strategy that will allow you to build a dynamic property portfolio over time.
This way, if something goes wrong, you are at less risk than if you were to invest in multiple properties at once, which could lead to serious financial difficulty.
If you’re ever in doubt, always be sure to seek financial advice from property experts or financial advisors before starting the process of building a buy to let portfolio.
One of the most important things that property investors can forget to focus on when purchasing buy to let property is the target tenant.
It’s easy to get wrapped up in property marketing and the potential earnings from your buy-to-let investment to the extent that an essential factor often gets neglected – who the property will be tenanted by?
Identifying the right tenants and ensuring they’re satisfied with where they are living is crucial to building property portfolios that can bring a steady cash flow through regular rental income and be less susceptible to void periods. This will also help you to avoid stressful and time-consuming disputes with tenants.
Essentially, understanding current tenant needs and what they look for in a rental property is one of the most important things to consider before you start a property portfolio.
Following the COVID pandemic, tenant demand has changed significantly as they now look for different facilities when selecting a property, according to Benham and Reeves.
For example, with more people working from home or in a hybrid schedule, many tenants view fast broadband and outside space as essential features of a rental property.
New builds are also highly popular with younger tenants, so aiming to add new build properties to your portfolio is a good way to ensure long-term tenant demand.
So, when considering how to build a buy-to-let portfolio that attracts and maintains a steady flow of tenants, these important points should be kept in mind, particularly in areas with a high population of young professional renters.
The best investment strategies look at creating property portfolios that include different types of real estate within a number of different markets.
By investing in just one type of property, you’re limiting your investment portfolio potential and making yourself more vulnerable to market downturns, increasing the chances of failure overall.
Property portfolio diversification means spreading your risk across several different ventures, which is vital when building a versatile portfolio of investment properties and keeping cash flowing.
Say your portfolio is filled with multiple student investment properties in the centre of one city. If the market slows in this area, your entire property portfolio will suffer.
You can diversify your property portfolio in two ways.
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 from the other investments in your portfolio, protecting your finances against potential struggles in the future.
For successful and high-earning portfolio landlords, diversification is essential to building a property portfolio that will stand the test of time so it should not be overlooked!
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Many people assume when setting out to build a property portfolio they will have to take on a lot more responsibility as a landlord.
A landlord’s job can be hectic, with the pressures of finding tenants, managing properties, and dealing with tenant issues demanding a lot of time and effort.
This is especially true for those already working full-time and looking to use their property portfolio to generate extra income.
Luckily, however, building property portfolio can be done using a fully hands-off investment strategy simply by hiring a property management company.
Enlisting a property management company will add to your expenses, but it is often crucial if you don’t 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 point of contact for your tenants.
In addition, they are highly experienced at what they do, which can be extremely helpful if you’ve just started to build a property portfolio.
This will eat into your profits a small amount, but it will save you a great deal of hassle. It also allows you to earn more income through other streams than if you were acting as a full-time landlord.
Typical functions of a property management company:
If then you find yourself wondering how to build a property portfolio while maintaining a full-time job, hands-off investing is certainly the best strategy to adopt.
When trying to figure out how to build a property portfolio, the long-term or end goal may not be at the front of every investor’s mind. However, one of the most important aspects of building a property portfolio, and UK property investment in general, is to have a strong exit strategy.
An exit strategy looks at the end result of each investment, considering what to do when the time comes to sell a property.
Your initial goals will tie into this. For instance, if you’re investing to build an attractive retirement fund, you’ll want to generate as much rental income as you can before selling at the right time.
Additionally, selling a property takes time due to the property being a physical asset. Therefore, If you want to sell your investment you need to be patient in order to secure the most value from your property.
Property is a long-term investment, and you cannot quickly dump such an asset 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.
In terms then of how to start property portfolio investing, it’s crucial to map out your entire investment strategy, clearly identifying your long-term goals.
Whether you want to know how to build a property portfolio with £50k, or how to grow a property portfolio from just £20k, one of the best ways to develop 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 under construction and usually come in the form of residential as opposed to commercial property.
There are several strong reasons why buying off-plan property is ideal for investors in 2023.
They are:
Of course, if you do choose to buy off the plan, you need to carry out 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 delays are often unavoidable in the construction industry, so ensuring the developer is of a high standard and has a portfolio of completed developments is important.
Many people interested in entering this lucrative market wonder how to build a property portfolio from nothing. Well, given the growth potential and the time it gives you to complete payments, investing off-plan is one of the most cost-effective ways to start a property portfolio.
To learn more about buying an off-plan property, be sure to check out our ultimate off-plan property guide.
If you’re trying to determine how to start a property portfolio with no money or have a low starting budget, you’re likely considering a buy-to-let mortgage.
While this is a popular decision among 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 are different 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, usually by remortgaging or selling your properties to cover the cost.
Naturally, if you’re planning for retirement and want to make a profit on your property you won’t want to be forced to use your sale to cover 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.
In any case, when thinking about how to build a property portfolio, the way that your investments are financed is an essential factor to consider.
You can learn more about buy-to-let mortgages and forming a limited company in our buy-to-let tax investment guide.
We hope you’ve enjoyed our guide to building a property portfolio in the UK.
The following will show you what an example property portfolio may look like with a property investment company like RWinvest.
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 that cover a range of price points, 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 offer some incredible investment opportunities.
Property Portfolio Example:
If you want to learn more about investing in any of these areas, you can read our detailed guides to learn more.
Each of these offers invaluable advice and expert insight into the UK’s best property investment markets, further outlining why property is one of the best areas to invest in this year.
Patrick is a property content writer at RWinvest. Keeping a close eye on the UK property market, Patrick helps our readers stay informed and up to date on the latest market news and statistics.
By submitting your details you agree to allow RWinvest to store and process the information submitted and receive product information and other communication, as stated in the privacy policy.
