How to build a property portfolio

23 Jul 2015
Property remains a sturdy investment because of its inherent value – regardless of the economy, shelter is a bare necessity. So once you’ve got your own family’s heads covered, it makes sense to consider investing in a buy-to-let property to increase your capacity to earn income, while diversifying your investment portfolio.

Acquiring property is a long-term investment that creates a reliable source of wealth for you and your family. Cash is earning you no interest in the bank and unlike stocks, in most scenarios property overcomes market fluctuations in the long run. In the UK for instance, property prices plunged in 2008 but by 2014 prices increased by 7.1% and the demand for rental properties is currently soaring. Throughout the continent, a similarly positive outlook abounds.


Where to start

When contemplating how to build an investment portfolio, first off, decide on the nature of your investment. Consider the following questions:

  • Is this an asset investment from which you anticipate making money in the long-term? If this is the case your acquisition could be based on up-and-coming areas instead of where is popular (and pricier) now.  


  • Should this property yield monthly income through rentals right away? If the answer is yes, you’ll obviously seek property in in-demand neighbourhoods. This doesn’t mean trying to buy a spot in central London. A well-frequented area on a popular coast could be more in line with your budget and yet still offer promising tenant opportunities.


  • Could this investment double as a pension plan? More and more people are opting out of pension schemes in exchange for income-generating property, often in a part of the world they love. When the time comes to settle down, the foreign property offers a perfect excuse to sell up locally and swiftly move somewhere with a more laid-back lifestyle.


  • Is this a single acquisition or potentially the beginning of multiple purchases? If you can afford it, acquiring a greater number of properties naturally provides multiple sources from which to generate income, in addition to increasing your asset value and spreading the risk if one of your properties does not perform as profitably as you’d projected.


Link personal financial means to potential investment

From an investment point of view, when you’re working out how to build your property portfolio it’s vital to remember to spread your risk. Even if you have a lump sum, be it through inheritance, a trust or legacy, it’s worth considering buying several affordable properties in different areas rather than one lavish McMansion.

Re-mortgaging your home and using the equity to purchase a second home is obviously riskier, so it’s essential to ensure that if mortgage repayments rise you can still afford them.

How to build a property portfolio

Research, research, research

Nobody figured out how to build a property portfolio through dumb luck. Research is essential.

  • Gauge the market to make sure you’re getting a good deal. Chatting to an expert in the field will save you the legwork. Be sure to find out about the potential to renovate, what sort of rental you can realistically expect, alongside the fees associated with the acquisition.

  • If taking out a mortgage, shop around for the best fees.

  • Get to know the area. Say for instance you were interested in property for sale in Calpe, take your family on holiday there to collectively test out the region.

  • Consider finding a good tenanting agent to manage tenanting and maintenance. Build this management fee into your investment.

  • Remember that income tax is charged on all rental income (minus deductions and maintenance costs) and when selling the property capital gains tax will be due. Although property is still likely to bring in a handsome return, it’s worth keeping these taxes in mind.


Professionally manage your portfolio

Take care of your cash flow, do careful rental yield calculations, source a good accountant if necessary and most importantly only acquire another property when you can afford to do so. Nevertheless with thorough research, sound advice and careful management your property portfolio can create a reliable source of wealth.


Enjoy the benefits


In this buyer’s market it’s the perfect time to snap up that villa or apartment in Europe. Each property has the potential not only to expand your wealth but also improve your lifestyle. Considering its year-round popularity Costa Blanca’s Calpe is a good choice for a buy-to-let property, and beyond that it’s a dream family holiday destination. When working on how to build a property portfolio you might realise that your investment goals are more about the long-term value and prospects of a sunnier lifestyle. For solid advice and details on Calpe property for sale, contact Grupo Esmeralda, leaders in the Costa Blanca property market.

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