How to Build a Property Portfolio - A Real Estate Business Plan
It's well known that property is a great asset class that can give you a high income as well as a fantastic work/life balance. But building a portfolio may seem daunting if you are only just starting out.
Today we look at how to start a property business whatever your personal situation, whether you're cash-rich and time-poor or time-rich and cash-poor.
Starting a property portfolio with £20,000 to £50,000 isn't just possible - it's happening right now across the UK. In fact, some of the most successful property investors I know began with similar amounts, using strategic approaches to build substantial portfolios. Don't get me wrong. If you have the money to invest then your progress will be faster.
Whatever your starting point the key is choosing the right property strategy to suit your situation and develop your portfolio over time.
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by Robert Jones, Founder of Property Investments UK
With two decades in UK property, Rob has been investing in buy-to-let since 2005, and uses property data to develop tools for property market analysis.
Growing a Property Portfolio vs. Starting a Property Business
When it comes down to it, there are two distinct approaches to investing in property.
The first approach is to grow and build a property portfolio. You don't of course need to grow a portfolio to compete with the largest UK landlord the build to rent giant that is Grainger PLC (currently at 9,100 properties), or even compete with your largest local investors.
Sticking to your own goals, ambitions and aims is more than enough and even a small portfolio of 2 or more properties can form a pension plan significant for most people when started early enough in their career and with the benefit of capital growth over time.
The second approach is to look at investing in property as a cash-flowing business that you can scale. Interestingly this can be done without a portfolio. You don't even have to own properties, you can simply be involved in real estate as the industry, but run a business like property sourcing or even property management, that is focused on the day to day business fundamentals rather than maximising portfolio building.
Getting Started in Property
Before diving into strategies and approaches, let's identify your starting position. Current property investors typically fall into one of these categories:
Available Capital
To help fund your progress what is your starting capital available:
- £20,000 - £50,000: Ideal for northern city investments or leasehold properties. Think of areas like Newcastle, Preston or even Liverpool.
- £50,000 - £100,000: Opens up opportunities for the two plus one strategy. Where you keep some in your portfolio and sell some (flipping houses) to enable cashflow to help you grow.
- £100,000+: Enables faster portfolio growth and diversification with many rental strategies available
Time Investment
How much time are you realistically able to invest in your real estate business plan and to build you portfolio over the years:
- Full-time employment: Hands-off strategies are often preferred with professional management in place for your properties
- Part-time availability: Can handle some property management or even adding value with a property development
- Full-time focus: Ability to actively manage and grow portfolio, creating value in sourcing and negotiating the best opportunities
Property Knowledge
- Complete beginner: New to property investment
- Some experience: Perhaps owned a home or been a landlord previously
- Experienced: Already familiar with property transactions and tenant regulation like the Housing Act.
Risk Appetite
- Conservative: Preference for stable, long-term investments
- Moderate: Willing to consider various strategies for better returns
- Progressive: Ready to explore multiple approaches (that may require more work) for faster growth
Be realistic and be honest.
Your position across these categories will help determine your most effective path forward. For instance, if you're starting with £20,000 while working full-time, your strategy might focus on a single high-yield property in an emerging market. With £50,000 and more time available, you could implement the two plus one strategy from the beginning.
How I Built My Portfolio & Property Career
(and how this can help you)
Personally I started in property in 2005.
There are a lot of options when it comes to creating a property portfolio and that's one of the reasons I love it. But, it can be quite confusing, to begin with.
My first property was a 3 bedroom mid-terrace house in an area of the North-West called Warrington.
It was the perfect place to start as house prices were affordable and rental demand was high.
One year later in 2006 I got a job as an estate agency as I was well and truely committed to the idea that property was my future career.
In 2007, with some knowledge, I left my job and went full time to build my own portfolio. I didn't have much in the way of funds. I knew I wasn't going to be able to buy any houses outright and refurbish them like some investors were doing. So I focused on property sourcing (building a business) and slowly building my own portfolio over time as my capital allowed.
My initial focus was on buy-to-let as it forms the cornerstone of most other rental strategies. I didn't necessarily want to build a buy-to-let empire, but I did want to secure my pension plan and build a career in the process.
Fast forward 20 years, I have been involved in a range of properties, with my smallest purchase a run down £20k terrace house in Burnley to our largest development a conversion of an office building to a 9 bedroom 8 bathroom House of Multiple Occupation, that required three stages of negotiation from buying the building, then separately buying the freehold then navigating planning permissions.
It doesn't matter where you start from or whatever your level of knowledge. Whatever you choose to focus on for your real estate business at the start, it doesn't mean that is where you will stay.
Having both a short and long term plan is helpful and be open to it changing over time.
What Strategies Can Help You Build Your Portfolio
The beauty of property investment lies in its versatility. Different strategies suit different goals, timeframes, and starting positions. Here are the key approaches that can help you create your portfolio:
Buy-to-Let
The foundation of many property portfolios. Buy-to-lets offer steady rental income and potential capital growth. They're particularly effective in areas with strong tenant demand and stable property values. They are often easier to secure finance with more options for buy-to-let funding than any other strategy.
Holiday Lets
With the rise of platforms like Airbnb, holiday lets can generate significant returns in the right locations. They require more active management but can offer higher yields than traditional rentals.
Property Sourcing
Don't have a large deposit? Property sourcing lets you earn while building industry knowledge and contacts. Finding deals for other investors can generate immediate income while you save for your own investments.
Property Flipping
For those seeking faster returns, simply buying and the immediately selling (flipping the properties) can be highly profitable. Success depends on careful property selection and negotiation skills to get the best price.
Buy-Refurbish-Refinance (BRR)
This strategy combines the best of flipping and long-term holding. By buying, refurbishing and refinancing at a higher value, you can recycle your deposit for the next purchase.
Student Accommodation
University cities offer excellent opportunities for student housing investment. Higher yields are possible with the specific property type known as Purpose Built Student Accommodation, as the location is central and the accommodation is designed to maximise space and affordability for both purchasing and renting.
Serviced Accommodation
Similar to holiday lets, however serviced accommodation caters to business stays and longer-stay guests. It can offer premium returns in the right locations with high occupancy rates as its less reliant on seasonal tourists.
Houses in Multiple Occupation (HMOs)
HMOs typically offer the highest yields but require more intensive management and navigation of regulations and licensing schemes. They're particularly effective in cities with large professional or student populations that are looking for affordable high quality shared housing.
The Two Plus One Strategy: A Powerful Approach to Portfolio Building
One of the most effective methods for growing a portfolio from a modest starting point is combining startegies.
Known as the 'two plus one' strategy.
This approach isn't about waiting years for natural market growth - it's about active portfolio management and strategic decision-making. It takes active involvement and time, so isn't one if you are looking for a completely hands off approach, but for building a portfolio, it can be effective.
Here's how it works in practice:
Instead of putting all your capital into one property and waiting for it to appreciate, you work towards owning three properties while maintaining the flexibility to sell when opportunities arise. The focus isn't just on buying - it's on knowing when to sell to fuel your next purchase.
The strategy works by:
- Negotiating discounts on your purchases
- Adding value on each property with a refurbishment
- Paying down any mortgage to help grow equity
- Selling 1 in every 3 properties you purchase over time, or 2 in every 3 properties.
- This releases capital back in to your portfolio to use as deposits on your next purchases
It can be high risk strategy as it requires leverage, time, project management of refurbishments and riding the ups and downs of the property market cycles.
Yet for the right active investors it is seen as a way to grow a larger portfolio over many years.
Conclusion
Remember, these steps aren't strictly linear - you'll often be working on several simultaneously. The key is continuous improvement in each area as you build your portfolio.
Don't overestimate what you can achieve in one year, but equally, don't underestimate what's possible in five to ten years.
To this end, I suggest you set both short and long term goals. Start your property education and focus on no more than two or three core strategies at any one time and grow your real estate business steadily over time.