Building a property portfolio can be an excellent way for developers and investors to reach financial success. Owning various investment properties with multiple income streams and prospects for capital growth can help you financially prepare for the future. With demand for rental property outstripping availability, rents are generally rising, making now an excellent time to become a landlord or start building your property portfolio.
As Stephen Clark, from Finbri Bridging Finance, comments, “The average monthly rent in the UK is now at £1,113, up 10.5% from the same time last year, and 0.9% from last month’s figure. The spiralling rent costs are opening up BTL opportunities across the country. So it’s easy to see why starting a property portfolio in the current market could be a smart move for investors and developers.”
A property portfolio is a collection of properties owned to generate income. The properties could be rented out or used as collateral for loans. A well-diversified portfolio will include properties in various locations and types, such as family homes, student housing, or apartments.
Best Ways – How to Start a Property Portfolio
There are numerous ways to invest in property, whether buy-to-let, buy-to-sell, or student housing, but in this guide, we will walk you through how you can start your portfolio.
When building your portfolio, you should consider what you want to achieve. Do you want to profit from long-term property capital growth? Or are you seeking to supplement your income with rental revenue?
You’ll most likely want to attain a blend of the two. These questions can help you determine what kind of property you wish to buy. For example, do you want to rent to as many tenants as possible to maximize income, although it may be more time-consuming?
Understanding the path, you want to pursue when creating your portfolio allows you to develop a long-term strategy and reduces the likelihood of making costly mistakes.
After you’ve decided on the type of property you want to buy and the portfolio you wish to establish, you’ll need to research the opportunity.
Carefully researched plans can assist you in identifying the right property in the right area with the best potential to meet your objectives.
Here are few tips that will assist you find the right property:
- Consult a local estate or letting agent about current market trends. This should give you an idea of what potential tenants look for in a property.
- Conduct research into the best locations for buy-to-let in the UK to discover where you can obtain the best return on your investment management.
- Look at the average property and rental prices on sites like Rightmove and Zoopla for market activity.
- Consider the type of tenant your home might attract and whether the local amenities in your desired area are appropriate for them.
Building a property portfolio with more than one property at a time is not generally recommended for new investors. Instead, the safest way to establish a property portfolio is to begin modestly and gradually expand.
You’ll need to pick your first investment carefully. For example, would you want a property close to your home so that you can keep up with maintenance? Or are you willing to take a step further and delegate portfolio property management to an estate agent?
Once your first property is operational and profitable, you can consider increasing your portfolio and investing in multiple properties.
As a property investor, you’ll want to get the best deal possible to maximize the return on your investment. When you find a property you want to buy. Your strategy with details such as the maximum amount you wish to pay can help keep you on track.
Consider the seller’s situation while devising your strategy – are they in a chain? Do they wish (or require) to proceed quickly?
Your plan may also be influenced by whether you are in a buyer’s or seller’s market.
Demand will be minimal in a buyer’s market. Giving you more options and the opportunity to offer below the asking price. There will be greater competition in a seller’s market. So you’ll need to act quickly and may have to pay slightly more than you intended.
An approach to get a cheaper property investment is to buy a property that is ‘below market value’ (BMV), which is usually a property that needs a lot of work but has significant investment potential. These properties are frequently found at auction.
Getting friendly with estate agents is another way to ensure you’re the first to hear about new stock coming onto the market. Remember that estate agents are sales focused because their pay is largely commission-based so they have monthly targets to hit. Estate agents will know the seller’s position, including how low they’re likely to go on price. If there’s a distressed seller or a repossessed house coming on the market and the agent needs to get a deal done quickly to achieve their commission. Agents like to know that they have access to property investors who will snap up a below market value property and help them get a deal over the line. To build your credibility with estate agents. Be straight-talking and be exact with the type of property you’ll be able to move quickly on.
When starting your property portfolio, remember to keep your financial goals and limitations in mind:
- Is your rental revenue sufficient to meet your mortgage payments and other expenses such as landlord insurance?
- Are you getting a return which are better than good on your investment?
- Would you be able to handle it if your tenant left or if there was a maintenance emergency, such as a flood?
Managing your funds is essential if you want to expand your portfolio. Keeping track of all different types of financial investment information will assist you in determining when you’re ready to buy your next property.
If you choose to rent your property, selecting the correct tenants after you’ve purchased the property is critical to developing a successful property investment portfolio.
The ideal tenants would be those looking for long-term rentals. Which can lower the time your property is vacant and earn no money (a void period).
Keeping a positive relationship with your tenants once they have moved in is crucial. You can accomplish this by:
- Being easy to reach.
- Reacting rapidly to requests for repairs and maintenance.
- Ensuring the property is secure and fully compliant by providing renters with as much warning as possible before visiting.
By addressing these factors, you can boost your chances of receiving a decent return on investment and expanding your portfolio sooner.
Do not attempt to run before you can walk and exercise caution when building your property portfolio.
You’ll need to monitor how the property market and the overall economy are faring. For example, if property values fall, it may be a perfect moment to invest but a bad one to sell.
Keep an eye on your debts and repayment commitments and deadlines. Borrowing against the value of many properties at the same time is common as you’re able to leverage the assets’ equity. But if you can’t afford your monthly finance repayments or miss loan repayment dates, you may have to sell multiple houses.
Property has been a common factor on all rich lists during the past few decades, as you’ll see. Implementing ways on how to start a property portfolio may be a profitable and long-term investment if done properly. What you want to accomplish should be the first thing you think about before developing your portfolio. Take into account the long-term benefits of increasing real estate values.