How to Build a Property Portfolio in the UK
Estimated reading time 5 minutes
In many ways a Property Portfolio can be a dream asset, a collection of properties that bring you monthly rental income, which covers their cost and leaves you with regular and consistent profit. As well as this, if bought intelligently at the correct price and in the right areas, these assets should also increase in value as time goes on, more reliably and consistently than other more unstable investments such as stocks and shares.
That said, exercising caution and ensuring you are well informed before embarking on building a property portfolio is absolutely essential. If a portfolio is managed poorly or consists of the wrong property types, it can easily turn from a hands off and hassle free income source into a total liability, leaving you at severe financial risk, especially if you are relying on borrowing to finance your portfolio acquisitions. At Gaffsy we are experts in building and purchasing property portfolios, following the guidelines set out in this article will ensure you develop your portfolio in the most risk free manner possible, and if you are looking to sell a property portfolio, do not hesitate to get in touch today for a free, no obligation cash offer.
How to build a property portfolio – first steps
Before embarking on your acquisition search, it is vital to understand your goals but also your limitations.
Your likely goals when building your property portfolio can be condensed to two main aims that landlords have, you will need to decide which one you will prioritise in your property search; long term increase in value or higher yield in the short term. Long term increase in value will come about as a result of the properties that comprise your portfolio increasing in price over time, while yield refers to the percentage of your properties’ value that is received in rent.
As a rule of thumb in the UK, areas that have lower rental yields, also have property that appreciates in value faster and more reliably, while high yield areas are likely to also have more stagnant property prices. As a landlord you will most likely want a combination of value increase and yield, so choosing an area, and specific property and tenant type that works for your needs is vital. For example, prioritising multi let properties like HMOs will likely bring you a higher yield, while also adding to the costs and effort in managing the property.
How to build a property portfolio – market research
Congratulations, you have worked out your goals as a landlord, the next step to building a property portfolio will be market research in your chosen area. This can be achieved in a number of ways:
- Check online portals like Rightmove and Zoopla, this will allow you to see the prices being achieved for different properties in the area, when crosschecked with rental values in the area you will be to reliably estimate the gross yield that is achievable.
- Speak to local estate agents, in both the sales and lettings departments. This can give further insight into the strength of the sales and rental markets; you can also request their recommendation on properties for sale that would perform well as rental investments.
- Investigate tenant types for the area, for example if the location has a student population there may be increased demand for houses with 4+ bedrooms.
Building your property portfolio
When building your property portfolio, it may be tempting to start ‘big’ with lots of purchases to begin earning the maximum amount straight away. However, this leaves you open to risk, the optimal way to build a property portfolio is to start small and ensure your system is working, meaning you have no trouble finding tenants at your desired rent, and the management of the property does not bring you unforeseen issues.
Once your methods have been tested and refined, and you have a solid base of tenanted, income producing properties, you are free to begin looking to grow more aggressively, the existing properties can also be used for refinancing, meaning you have more cash funds to purchase further investments, taking good care to ensure you always have the financial reserves to handle any sudden repairs of vacancies that could arise.
Congratulations, you have the start of a Property Portfolio, and can decide whether to have the hands-on approach of managing the properties yourself or leaving it to a reputable agent to give you a more hands off investment.
Selling your property portfolio
If for whatever reason you are looking to sell your property portfolio, Gaffsy are here to help. With a combined decades of experience purchasing portfolios, we have the know-how to value and offer on assets with confidence. We are a cash house buyer, meaning that we do not need approval from any lenders as we use our own funds, ensuring faster and more secure transactions when selling your property portfolio. We will purchase tenanted or vacant portfolios, anywhere in the United Kingdom for competitive prices.
Get in touch for a free no obligation cash offer today.