How to Build a Property Portfolio

1. Make Sure You’re Financially Ready

Being financially secure is the number one consideration for any investment. You wouldn’t want to pay above the odds for an investment that you can’t afford, so the first step in how to build a property portfolio is to assess your financial status.

Contrary to popular belief, you don’t need to have fortunes to begin investing. On the other hand, if you’re wondering how to build a property portfolio from nothing, you need to know that this isn’t possible. All investors should have a substantial budget ready before they start building a property portfolio.

With the help of buy to let mortgages and investment payment plans, it’s possible to buy your first investment property with a smaller budget. It also helps to pay special attention to areas where property is more affordable, like Liverpool, as this can help you get more for your money. If you’ve found an investment opportunity that looks perfect for you but is just out of your price range, remember that it’s often possible to haggle for below-market prices.

If you do opt for a buy to let mortgage to pay for your investments, remember to also factor in mortgage payments when planning your budget. Our buy to let mortgage calculator lets you work out your potential mortgage payments, factoring in interest rates and the length of the mortgage. Other costs that you should think about when planning the financial side of the investment include taxes such as stamp duty tax. Usually, buy to let investors are required to pay stamp duty tax of 3% on property worth up to £125,000, and 5% on a property priced between £125,000 to £250,000. During the stamp duty holiday, however, which was introduced in July 2020, investors are only required to pay 3% tax on properties with a value of up to £500,000. Normally, anything between £250,000 to £925,000 would require 8% stamp duty tax, so this is a great opportunity to make some savings when building a property portfolio in the UK. The stamp duty holiday is set to last until March 2021, so act fast to benefit from stamp duty savings.

Start Small

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 slow when building a property portfolio. Starting small with one or two solid investments is a good way to start to build up your portfolio. The research stage of the investment process will prepare you for this, helping you identify opportunities that come with less risk and a higher likelihood of success.

2. Think About Long Term Goals

Property investment is a serious venture that shouldn’t be rushed into, even if you want to know how to build a property portfolio quickly. 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 what you ultimately hope to achieve. Establishing long term goals is such an important part of any investment strategy. Unfortunately, many people don’t put a lot of focus on goal-based investing, which can cause their investment to lack focus. Here are some of the things you should think about when planning long term goals for your property portfolio.

Capital Growth or Rental Returns?

You need to think about what your main motive is for investment. For instance, are you more focused on making returns on a regular basis through rental income, or do you hope to make a large lump sum of return through capital growth when you sell the investment?

If your personal goal for investing is to provide yourself with a significant retirement fund, you might decide that capital growth returns are most important to you, and so finding a property with high growth prospects is ideal. Alternatively, your main focus could be rental returns, in which case you should find an opportunity that comes with high rental yields. Of course, the most successful investments will always factor in both capital growth and rental yields, so it’s always a good idea to look for a property that meets both these requirements.

Hands-on or Hands-off?

When building a property portfolio, you should also think about whether you want to be more hands-on or hands-off with your investments. Being hands-on means that you take responsibility for finding tenants, managing property listings, and dealing with any queries or issues about your property. Essentially, being a hands-on investor means to be a landlord, while being hands-off means that you don’t have to worry about the landlord side of buy to let. As a hands-off investor, you can instead hire a management company to take care of landlord duties for you. When planning goals for your property portfolio, this is a crucial element to consider, especially if one of your goals includes building a property business.

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. If you want to build a property portfolio while still maintaining a full-time career, then hands-off investing is your best option. On the other hand, if you’re keen to find out how to start a property business of your own and turn buy to let into your day job, you’ll most likely prefer to manage the properties yourself with a hands-on strategy. This is because managing your own property allows you to gain first-hand knowledge and experience of the buy to let sector. Some investors also opt for a mix of hands-on and hands-off investments for their portfolio.