So, what amount of money does it take to build a property portfolio, and how much can be earned?
Understandably, when considering building a buy-to-let portfolio, you must ensure 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, 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.
Keep Track of the Market
Keeping an eye on current market values and future forecasts is essential when considering how to build a property portfolio and deciding when the best time to invest is based on personal financial circumstances.
Following a brief decline in property values this year, Savills predicts prices to rise by an average of 17.9% over the next five years. This means 2024 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:
- 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.
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 2023/24 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?’