How to build a property portfolio


Property has always been one of the most popular investments, but getting it right so it actually produces an income can be tricky. So how can you build an income-producing property portfolio?


The most common mistake people make when buying property as an investment is being sentimental about locations.

Often people will buy in areas they are familiar with or have some affinity towards. Much like building an equity portfolio, the process should be a data-led one and not an emotive one. 

So, what is the data that matters? 

When looking where to invest, there are a few key things to consider. What are the population movements that could have an impact on the area? Is there an influx of people, businesses, and jobs to the area, or is it seeing an exodus? Are there any major infrastructure projects that will improve connectivity?

This leads us to regional cities that are going through large population surges, mostly due to London companies relocating post-Brexit to cities such as Birmingham, Leeds, LiverpoolManchester, and Sheffield in order to reduce costs.

The easiest way to reduce costs is to move to cheaper areas with cheaper premises. They can also benefit from young professionals who studied in those cities and future-proof their businesses. Most of these areas are in a deficit of housing which is driving prices higher.


For a property portfolio that is focused on income, it is important to not end up in a situation where unseen costs are eating into your potential yield. Generally, the safest options will be properties that are popular with young professionals, are newly built but already complete and in central areas. These will probably be studio and one-bedroom units near business hubs or transport connectivity. 

The young professional market is the one that produces the most predictable results. 

This is because they’re part of a very large cross-section of the population, which means the time on the market of a property is minimal. 

Moreover, young professionals are always going to pay rent. This is because they want to buy their own property in the future. They need to keep their credit record well maintained to do this.

In the case of them losing their job, it’s very easy for them to move back home so as not to disrupt their credit score.

Alternatively, if an investor has a family in a property that gets into financial difficulty, it is very difficult to make that property vacant again. It’s often the case that the family has no choice but to stay there.


With this in mind, one- and two-bedroom apartments with the price point between £135,000 and £160,000 make the most sense as that is usually something that is going to appeal to that type of renter. £135,000 is the suggested minimum because at 75% LTV the loan amount will be over £100,000 which will give us a wider choice of lenders and therefore a better chance of a lower interest rate.


How much do you really need to start building your property portfolio?

The rule of thumb would be around £38 – 45k. However, if you already have a property, you may already have this or more.

The easiest way for people who already have a UK property to expand their portfolio is to release equity from that property.


Staying with predictability, always use apartments rather than houses and leaseholds rather than freehold.

This surprises most people.

Freeholds are very unpredictable when it comes to maintenance costs, especially on older properties with no warranty. You own the entire building and so its upkeep is your responsibility. At some point, you’re going to have large bills to pay whether it be plumbing, windows, or roof.

Long term leaseholds have a service charge, which you can regard as a sort of insurance against this. Essentially, it would equate to the same but can be costed into a cash flow, so net yield can be predicted and managed.


HMO’s (Homes of multiple occupancy) typically offer close to zero capital growth.

This is because it’s a business and will only be sold to people with an appetite for that, which is a very small cross-section of the population.

Another issue is that with many rooms and tenants, there is an extra risk of default. Plus, with many rooms, there are many bathrooms which means there are potentially high maintenance costs that are unpredictable.

HMOs also come under jurisdiction of County Council, who can change the rules at any time.

If they change fire regulations, you may have to change some fitting or layouts which would be another extra unseen cost.

Some people do make these work, although most of these people do the conversion themselves from a dilapidated state. Most people don’t have the time or inclination to do this.


The other one which we are commonly asked about is student accommodation.

In this case, disposing of the asset is basically impossible.

You can’t mortgage them and usually, you’re buying a share of a company that owns it. If the company goes down, you’re then in a legal battle to retrieve your funds.


We have created a hands-off solution for investors who would like to create income from property. Our property specialists and in-house mortgage advisor can take you from A to Z efficiently and painlessly.

Get in touch with us today if you would like to speak to one of our team.

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