How to build a property portfolio

Many people dream of owning a property portfolio. After all, the returns can be substantial, and you may even be able to ditch the 9 to 5 job and become your own boss.

However, there is a big difference between owning a single buy to let property and scaling up to a sizeable portfolio. To succeed, you need a solid strategy with clear goals and an understanding of what you want to achieve from the outset.

We’ve compiled five tips to help turn your dreams into reality and get you started on your property portfolio journey.

Identify your long term goals

As with any business venture having a sound plan and long term goals will help keep you on the right track from day one. Building a property portfolio is no different.

Before you make your first purchase carefully consider what your long term financial aims are for your portfolio.

Do you want a high level of rental income each month?

Are you more interested in the capital growth of the properties?

Or, would you like a combination of both!

Once you have a clear picture of what you want your portfolio to achieve, you can focus on investing in properties that will deliver on your aims.

Managing your portfolio

How do you plan to manage your properties? Will you be doing everything yourself, or would you prefer other people to handle the landlord responsibilities?

There is no right or wrong answer; your approach will simply reflect your priorities and personal circumstances.

Managing your portfolio yourself will give you a clear insight into exactly what is required, and you can carefully control costs. However, as your portfolio grows, you may find more time is spent on day to day management rather the growing your portfolio.

By outsourcing landlord responsibilities to a lettings agent, you will increase your costs, but you will also have more time to focus on portfolio growth.

Research, research and then research some more

The UK property market is complex and ever-changing so having a good grasp of how it all works is essential before you jump in with your first investment.

Based on the goals you’ve already identified, consider which cities or postcodes may be best for property investment.

Pay attention to the demographic in the areas where you are considering investing. Towns and cities with large numbers of students and young people will generally mean a more buoyant rental market.

It’s worth looking at the cities which are predicted to have the largest population growth over the next 5-10 years as these will typically have high numbers of new residents needing a home. Cites such as Cambridge, Oxford and Milton Keynes are all predicted to have 20% plus population growth in the next five years and therefore present a perfect opportunity to a property investor.

How do you plan on funding your portfolio? If you are considering Buy to Let mortgages, then it’s worth talking to a mortgage broker who specialises in this area. A broker will have expert knowledge of the mortgage market and will handle the paperwork and application process, thereby saving you time that you can better spend elsewhere.

Property type

What type of properties will you be focusing on? Do you want to renovate run-down properties or would you prefer to buy in new developments that require little to no work?

If you plan on buying properties at auction, you should visit several times to observe before you make your first bids. This will give you valuable insight into how a fast-paced auction room works so you can become more comfortable and confident in the environment.

If you plan on developing properties, then finding a reliable team of tradespeople is essential. You can keep costs down by completing much of the work yourself. However, some jobs must, by law, must be completed by an individual with the correct training and certifications.

Have an exit plan

It may be many years away, but it’s always worth considering your exit strategy.

Do you plan on keeping your portfolio for several years, perhaps into retirement, living off the rental income, or would you prefer to release the capital by selling off properties?

It’s essential to keep updated with the developments in the housing market, so, if you do plan on selling, you do so at the right time.

Summing up

Building a property portfolio can be both exciting and rewarding, but it also requires commitment and a serious investment of both time and money. If you are thinking about developing a portfolio, the first step should always be careful planning and outlining your long-term goals from the start.