Landscape view not supported, please use portrait view!

How to Build a Property Portfolio – Comprehensive Guide

A property portfolio is a collection of assets in the real estate sector. Whether family homes, student houses or apartments.

Currently, rental growth in the UK is rising at its fastest rate in 13 years and average rents are 4.2% higher than the previous year, reaching £1,175 a month in January 2023. With demand for rental property outstripping supply, there’s a general upward pressure on rents. This means now is a great time to be a landlord or begin to build your property portfolio.

While every real estate portfolio will be unique, creating a portfolio tends to follow the same general pattern. Whether you want to know how to build a property portfolio from nothing, or want to expand your investments to become a portfolio landlord, in this article, we take a look at some of the benefits of building a property portfolio and how to create one for success.

Why Create a Real Estate portfolio?

building a property portfolio

Building a real estate portfolio can help you achieve your financial goals. It can be a great way to diversify your investments and mitigate risk. While a single investment property can deliver a solid stream of monthly passive income, it’s unlikely that you will achieve financial freedom through one property alone.

Owning multiple investment properties is a far better strategy. Multiple income streams and opportunities for growth in capital gains can set you up financially for the future. Whether your goal is early retirement or to build a profitable business.

Additionally, having multiple properties in different locations or markets can also help you take advantage of different opportunities. This can allow you to increase your return on investment potentially.

Moreover, creating a real estate portfolio is a good strategic move for the following reasons:

  1.  Wealth Building: Real estate is a tangible asset that historically appreciates over time, offering a solid avenue for building wealth. Unlike stocks or bonds, you have the physical property that can gain value, providing the potential for capital gains when sold.
  2. Passive Income: Rental properties can generate ongoing passive income, offering a steady cash flow that can grow as you expand your portfolio and as rental rates increase over time.
  3. Diversification: A real estate portfolio can diversify your investment holdings, balancing out the volatility of other asset classes and potentially reducing overall investment risk.
  4. Leverage: Real estate allows for the use of leverage, meaning you can control a large asset (property) with a relatively small amount of your own capital (through mortgages). This can amplify your returns, though it also increases risk.
  5. Tax Advantages: Property owners can benefit from a variety of tax deductions, such as mortgage interest, property taxes, operating expenses, depreciation, and repairs. These can significantly lower the tax burden on income generated from the property.
  6. Inflation Hedge: Real estate often serves as a hedge against inflation, as property values and rental incomes typically increase with inflation, preserving the purchasing power of your capital.
  7. Control: Unlike other investments, you have direct control over your real estate portfolio. You can affect its value through property improvements, refinancing, changing property management, and adjusting rental strategies.
  8. Equity Building: As you pay down mortgage debt over time, you build equity in the property, which can be leveraged to purchase additional properties, thus growing your portfolio.
  9. Retirement Planning: A real estate portfolio can be a critical component of retirement planning, providing both a lump sum if properties are sold and ongoing income if they are held.
  10. Legacy Creation: Real estate can be passed down to future generations, offering a long-term legacy and potential financial security for your family.

How to Start a Property Portfolio Step-by-Step

How to Start a Property Portfolio Step-by-Step

Step #1: Determine Your Investment Goals and Have a Strategy

The first step in how to build a property portfolio is to have a clear vision of what you want your property portfolio to help you achieve.

Whether you are looking for a reliable source of monthly passive income or to build a business that will help you achieve financial freedom. Your end goal will determine the path you take and what your investment strategy will look like.

Also, it’s possible to pivot or adjust your goals along the way. It’s prudent to lay out a 1-year, 5-year, and even 10-year strategy with your investment plans to incorporate buying, selling, and borrowing to have the clearest possible vision toward your success.

There are multiple ways to invest in property – whether buy-to-let, buy-to-sell or student accommodation – and multiple tenant demographics to target, so it’s essential to find the strategy that is right for you based on the time and knowledge you have to invest and the lifestyle you want to achieve from your investment.

Once you’ve laid out your long-term goals, it’s time to take action. You should start by researching the property markets and familiarizing yourself with the current real estate trends. You can also get valuable information from property investment blogs written by industry professionals.

Step #2: Educate Yourself

Learn the fundamentals of real estate investing, including property values, market trends, rental yields, and the legal aspects of property ownership and landlord responsibilities.

With any investment, make sure you thoroughly conduct your research. Look for up-and-coming areas where you can get a relatively cheap property but with strong capital gain projections.

Areas with population growth and where regeneration and investment are transforming the area are a good place to start. You’ll need to look into tenant demand too. Is your property in an area with demand from young professionals or a strong student market that gives you a steady stream of tenants?

Identify promising areas for investment by looking at factors like economic growth, employment rates, transport developments, and rental demand. To get you started, take a look at our recommendation for some of the best buy-to-let- areas in the UK right now.

Step #3: Financial Assessment & Cash Flow

Review your financial situation to determine how much you can afford to invest without overextending yourself. Consider speaking with a financial advisor to help assess your investment capacity.

A financial advisor can provide insights into how property investment fits into your overall financial plan and help you understand the implications for your taxes and estate planning.

A mortgage broker can help you navigate the complex world of property finance and find the best mortgage deals to suit your needs.

If you want to do it yourself, you should:

  1. Understand Your Financial Position:
    a. Net Worth Calculation: Begin by calculating your net worth. This involves subtracting your liabilities (what you owe) from your assets (what you own).
    b. Cash Flow Analysis: Review your monthly income and expenditures to understand how much you can realistically afford to allocate toward property investment without affecting your standard of living.
  2. Determine Your Investment Capital:
    a. Savings: Determine how much money you have saved that can be used as an investment. This could be used for down payments and associated purchase costs.
    b. Equity: If you already own property, consider the equity you have built up, as this can be used as collateral for financing further investments.
  3. Assess Loan Availability:
    a. Mortgage Pre-Approval: Approach lenders to get an idea of how much they would be willing to lend you, based on your income, credit score, and other financial commitments.
    b. Interest Rates: Consider current mortgage interest rates, as they will affect the cost of borrowing and the profitability of your investment.
  4. Budget for Additional Costs:
    a. Transaction Costs: Account for stamp duty, legal fees, and other transaction costs that accompany property purchases.
    b. Emergency Fund: Ensure you have an emergency fund to cover unexpected expenses, such as urgent repairs or if the property is vacant for some time.
    c. Maintenance and Upkeep: Budget for ongoing maintenance and potential renovation costs to maintain or increase the property’s value.
  5. Consider Future Changes:
    a. Income Stability: Reflect on the stability of your current income. Is your job secure? Do you have other income sources?
    b. Financial Goals: Align your property investment with long-term financial goals, such as retirement planning, education funds, or wealth accumulation.
    c. Risk Tolerance: Be honest about your risk tolerance. How would you cope if the property market dips or interest rates rise?

It’s essential to ensure that any investment property has a higher rental income than expenses.

Ensuring your income is higher than your expenditure will give you equity to reinvest more quickly for faster growth.

In your cash flow projections, consider if you can handle any void periods and what should happen in the event of unexpected costs like repairs to ensure you have a contingency plan.

Step #4: Choose the Right Property

 portfolio landlord

Start small.

When it comes to building a property portfolio, it’s essential to make sure you get off to a good start. Ensuring you have a solid foundation before you scale will make consecutive investments easier down the line.

Your first property can arguably be the most important, and it’s worth investing time and research to ensure you find something with good rental yields and strong potential for capital growth.

Few landlords create a portfolio by purchasing multiple properties from the start – the most common approach is to start small then scale gradually. When it comes to your first property, consider elements like whether you want the property to be close by so you can manage it for yourself, or whether you’ll hire a property management company to handle the day-to-day for you.

Here’s what to consider to ensure you make a sound investment:

  1.  Location:
    a. Desirability: Opt for areas with high rental or buyer demand, good schools, amenities, and transport links.
    b. Growth Potential: Look for signs of future growth, such as planned infrastructure or regeneration projects, which could increase property values.
    c. Safety and Accessibility: Properties in safe neighborhoods with easy access to public transportation tend to hold their value and attract tenants.
  2. Property Type and Condition:
    a. Type: Depending on your target market, decide whether an apartment, a single-family home, or a multi-unit property suits your goals best.
    b. Condition: Assess whether you want a turnkey property or are prepared to invest in renovations. While fixer-uppers can offer a higher return on investment, they require more time and management.
  3. Financials:
    a. Rental Yields: Calculate the potential rental yield to ensure the property can cover its mortgage and other costs, with the potential for profit.
    b. Resale Value: Consider the property’s potential for appreciation. Research past price trends in the area and consult with local real estate experts.
  4. Market Dynamics:
    a. Supply and Demand: Understand the balance of supply and demand in the area. Over-saturation can lead to lower rents and longer vacancy periods.
    b. Economic Stability: Areas with diverse employment opportunities tend to be more economically stable, which supports property demand.
  5. Legal and Regulatory Factors:
    a. Zoning Laws: Check local zoning laws to ensure they align with your intended use of the property.
    b. Taxation: Understand the tax implications of owning and selling the property, as they will affect your net returns.
  6. Future Scalability:
    a. Portfolio Fit: Consider how the property will fit into your broader portfolio strategy. Does it diversify your risk? Can it help you scale in the future?
  7. Exit Strategy:
    a. Resale Options: Ensure there are multiple exit strategies. You might plan to rent it out initially, but selling could be an option later.

Engage a local real estate agent with a solid track record in the area. Have the property professionally inspected to avoid costly surprises down the line.

Choosing the right property involves a balance of quantitative analysis and qualitative judgment.

To find out more about how to build a property portfolio, get in touch with our experts.

Step #5: Track Important Metrics

Once you already have one or two properties under your belt, one of the most important things in your growth journey as a portfolio landlord is keeping track of metrics.

  •  Does your current rental income cover your mortgage repayments?
  • Are you making a reasonable return on your investment?
  • Do you have enough funds to cover potential void periods?

Tracking these metrics will give you an overview of how your portfolio is performing and alert you to any problems.

Additionally, monitoring these metrics as well as the market will help you make decisions about when to buy new or sell old properties. By doing this you will be better equipped to maximize your profits and minimize losses from your portfolio.

Once you find a property you think will make a good investment, you’ll need to calculate rental yield and any outgoing costs. Such as tax, mortgage payments, maintenance and licencing fees to make sure your investment puts you in the black.

Generally, a good rental yield sits at around 5%, and a higher rental yield of something closer to 8% would give you a contingency budget should costs increase with little warning. You can calculate your rental yield by dividing the rental income by the price paid for the property to get a percentage. You can read more about rental yields in this article.

Step #6: Keep Tenants Happy

It’s important to do adequate due diligence on your tenants to limit the number of issues you might have with a property. Void periods without rental income are one of the biggest risks for investors. If you have several vacant properties at the same time, your cash flow can quickly spiral out of control. Keeping tenants happy can ensure they stay longer and sign on for longer rental periods and minimise your void periods.

However, the best way to avoid void periods is by thoroughly researching the area you’re investing in. This will make sure there is adequate rental demand. You can also undertake improvements on your property to make it more desirable than other properties in the market.

It is of utmost importance to always keep up to date with the latest trends. Trends in terms of design and features that tenants are looking for, such as energy efficiency and modern appliances.

Finally, you should also have a good tenancy agreement in place. This agreement should outline all the terms and conditions of the tenancy. It should include information about the rights and responsibilities of both parties. As well as any rules or regulations that need to be followed. Having a good tenancy agreement in place can help protect both yourself and your tenant from any potential issues.

Step #7: Diversifying Your Property Portfolio

In determining how to build a property portfolio, one question to consider is whether you want to diversify the types of property you invest in.

At first, consider the type of property you’d like to deal with and try to stick with the same type in the early days of your investing. Staying local can be advantageous, as you will be familiar with the market, the area and the types of tenants you want to target.

Similarly, specialising in one particular property type can help you build your knowledge and make you more comfortable and confident in your investments.

On the other hand, diversifying your portfolio can not only help to grow your portfolio more quickly, but also spread some of the risk. If you invest in a few properties in the same area, but it doesn’t grow for several years, your equity to purchase more properties may be limited.

Additionally, you may also be looking at empty properties or limited monthly rent. On the other hand, if you have a few properties in different areas, even if a couple of the areas don’t grow, growth in one of them will give you access to equity to reinvest into your property portfolio for faster returns.

In other words, even if one market crashes, you may be able to weather the storm more easily if your investments are spread out across different areas.

To find out more about how to build a property portfolio, get in touch with our experts.

How many Properties is Considered a Portfolio?

After securing your first property, over time you can begin to grow your portfolio by buying additional properties.

If you have four or more mortgaged properties, you’re classed as a  portfolio landlord. In the UK, 38% of landlords own between two and four properties, and 30% of landlords own five to ten properties, whereas 14% of landlords have just one rental property.

It is important to remember that having and managing a portfolio of properties can be complex. It’s essential to keep up with all the changes! Hiring a property management company may be a step you should consider once you become a portfolio landlord.

A property manager can provide advice on how best to manage your properties. As well as taking care of the day-to-day tasks such as finding tenants and collecting rent. In addition, you can get useful advice on how to make the most out of your investment.

How to Make a High-Performing Property Portfolio?

1. Have a Long-Term Strategy and Set Goals

As a portfolio landlord, it’s important to put in place a clear set of goals and financial aims. Property investors focus on two things in particular: capital appreciation and sustainable rental income.

Before purchasing any property determine your goals and make a realistic timeline for achieving them to keep your business on track. While you have a long-term goal in mind, keep updating and adjusting it regularly in order to stay motivated and adaptable to any changes in the market or your situation.

2. Be Prepared

Always remember your end goal and have an exit strategy – whether you’re looking to flip properties for immediate wealth generation or want to generate comfortable and sustainable incomes for a solid income stream – it’s always a good idea to have a plan on how you’ll sell your properties.

Your exit strategy should ensure you’re not stuck with properties that are difficult to sell or that don’t generate the returns you had hoped.

3. Consider Off-Plan Properties

Off-plan properties are a great way to help investors to secure a good deal.

Off-plan properties are those still in the investment stage, and usually, if you invest in the right area with rising prices and strong rental demand, you can make a strong return.

These properties can usually be had for below-market rates. Developers often offer discounted prices to attract buyers at the start of a development or are willing to negotiate on the asking price. In some areas, it’s possible to find an off-plan property for 20% – 50% below market value.

If you’re a portfolio landlord, you’ll have to wait a while for the completion of the property. Nevertheless, when considering the savings and popularity of new builds with tenants, you can still make great returns. Find out more about the benefits of investing in off-plan properties in this article.

To find out more about how to build a property portfolio, get in touch with our experts.

Specialising vs. Diversifying

When it comes to building a property portfolio, investors often grapple with the choice between specializing in a particular type of property or market, versus diversifying across various types of properties and locations.

Both strategies have their merits and potential drawbacks, and the optimal approach can depend on individual investment goals, risk tolerance, and market conditions.


  1.  Focus: Concentrating on a specific niche can allow for deeper understanding and expertise, potentially leading to better-informed investment decisions.
  2.  Efficiency: Specialization can lead to operational efficiencies and economies of scale, as processes and management can be streamlined.
  3. Expertise: Becomes known as an expert in a particular market or type of property, which can lead to better opportunities through industry networks.
  4. Market Sensitivity: However, this approach can be riskier if the selected niche suffers a downturn, as the entire portfolio could be affected.


  1.  Risk Mitigation: Diversification spreads risk across different property types and markets, which can protect the portfolio against fluctuations in any single market.
  2. Balance: A mix of property types and locations can balance out the volatility and provide a steadier income stream.
  3. Adaptability: Diversification allows for greater flexibility to pivot investment focus in response to market changes.
  4. Complexity: The downside can be the increased complexity of managing a diverse portfolio, as well as potentially higher costs and a steeper learning curve.

In crafting the best approach for your portfolio, consider:

  •  Market Knowledge: Your level of understanding of different property markets and types.
  • Investment Capacity: The size of your investment capacity may dictate a more cautious diversification approach.
  • Time Horizon: Longer investment periods can better absorb market fluctuations, allowing for specialization with less risk.
  • Personal Interests and Expertise: Your personal interests and areas of expertise can inform whether specialization or diversification is more appropriate.

Ultimately, whether specializing or diversifying, success comes down to meticulous research, due diligence, and ongoing portfolio evaluation. Investors should also consider consulting with financial advisors to tailor their strategy to their unique financial situation and goals.

Seek Professional Advice and Guidance

If you’re curious about how to build a property portfolio, whether you’re starting from your first property or adding to those you already own, this article has outlined some of the factors you need to consider.

Building a successful property portfolio is about thoroughly conducting research to make sure you’re investing in an area with good rental yields and potential for capital gains, tracking the right metrics to make sure your properties are performing and setting goals in line with your target and the lifestyle you want to achieve.

To find out more about how to build a property portfolio, get in touch with our experts.