We've always maintained that anyone can get started in property no matter what their financial circumstances may be. Today we look at how to build a property portfolio of 11 or more houses with a deposit pot of only £50,000. The strategy you will need to achieve this is called the 'two plus one' strategy. Read on to find out more.
The Two Plus One Investment Strategy
The most effective way of creating a portfolio of eleven houses from £50,000 is to use what is known as a two plus one strategy.
The principle behind this strategy is not so much to have a solid plan for buying properties but to have a solid plan for selling them.
The truth is anyone can build a property portfolio without needing a large amount to invest. With the right method, a lot can be done with little.
So, if you have three houses, you should always be ready to sell two and keep one, or ready to keep two and sell one.
Ultimately, the trick to this property strategy is to always have a plan for bringing money back into your pot so that you can re-invest it and grow your portfolio.
Because one of the downsides of building a property portfolio is that, if you find just one property to put (all) your money into (say, £50,000), then you will have to wait for the property to grow significantly in value before you will be able to sell or refinance the property without making a loss.
It is this waiting for growth that more-often-than-not stops investors from being able to grow their portfolios quickly. If you are waiting for your investments to grow in value, or if you are trying to save for a deposit from your rental income, it is going to take a long time.
Selling Your Properties Strategically
Selling your properties with a plan in mind, is the secret to building a portfolio quickly. If you have three properties and no additional funds you should be prepared to sell two of them. If you have access to some additional finance then you might only need to prepared to sell one.
If you want to grow your portfolio a little slower and are a little risk averse in terms of the number of houses you want to take on in the early days, then it could be that selling two properties and keeping one would suit you better.
The trick is to keep selling, build a bigger deposit pot, keep buying and keep growing your portfolio.
Don't Overestimate What Is Achievable
Overestimating what can be achieved, in say the first year of work, is a trap we see a lot of our clients fall into.
Of course, you will want to go quickly; especially, if you are just getting started. This is understandable; it's natural.
However, this is an instinct that can sour quickly. If you overestimate what can be achieved in a 12 month period then, when you don't achieve your goes, you will end up feeling frustrated.
This pattern doesn't only apply to beginners. We've seen it happen to people who have been investing in property for 5 years plus. It is however much more common for people in their first year.
What I'd say is this: Don't overestimate what you can achieve in a year. But, don't underestimate what you can achieve in five.
Putting It All Together
Using the two-plus-one strategy you will be able to grow your portfolio much faster. Out of three properties, you should always be looking to sell at least one of them. Keep going with that; developing and selling, say one property every six months, with a mind to re-investing the freed up money in more property and in no time at all you will have 11 properties from a starting point of £50,000.