In this article, we’re going to run through some considerations when starting your buy-to-let portfolio, things that you should be thinking about that will help you grow your portfolio. People get into property usually for one of two reasons: Reason 1 is to increase their monthly cash flow to allow them to upgrade their lifestyle. Reason 2, build a nest egg for the future. – Some want both.
Your starting position
If we begin by looking at reason number one for wanting to build a portfolio, increasing your monthly cash flow, this is normal for you to cover your outgoings and increase your standard of living. To begin with, you need to understand where you are right now. This can be an eye-opening exercise as so many people are paying direct debits and subscriptions that they no longer need or want, resulting in money effectively being wasted.
- Log into your online banking and download the last 3 months’ bank statements and calculate all of your monthly outgoings.
- Once you have that figure in mind, you know how much that you need to be making from property to cover your outgoings and improve your lifestyle.
What I’ve found works well and keeps people on track is by creating a chart or graph with your outgoings at the top and zero at the bottom. Then every time you make some money outside of your main income, whether this is from property or another side hustle, shade in a block visualising getting closer to the point of covering your outgoings. – This can be done on a whiteboard or a spreadsheet and is just one method of tracking your progress.
Your understanding of property
Our second consideration is having a foundational understanding of property. I meet so many investors who are unsure on where they should be starting – I advise to begin with the free content, there are some great channels on Youtube that offer real value!
As well as Youtube, there are some great books available that can be picked up through Amazon or Audible depending on your preferred reading method. – One book that you will see property investors talk about all of the time is Robert Kioyosaki’s, Rich Dad, Poor Dad.
Your investment strategy
The third consideration is deciding what strategy you will be focusing on. We’ve put together a guide that covers some of these strategies here. There are lots of different avenues that you can go down, whether that be the typical buy-to-let, Houses of Multiple Occupation, referred to as HMOs, Service Accommodation, and developments just to name a few.
Our advice, be laser-focused on one strategy and then scale once you have effectively mastered that strategy before moving on to another one. – Not that you will always need to change your strategy. – The reason that we help investors build a portfolio of buy-to-lets comes down to two reasons. Reason 1 – Families are always going to need a property to rent. Reason 2 – The stock that is available isn’t always of the best quality. The latter of which is something that we are passionate to change for the better as investors. – However, it is totally up to you on where you start.
One thing that we can safely suggest avoiding is the shiny penny syndrome, which unfortunately is something we see time after time, initially people want to get started with Buy-to-let, then they see that someone else is making money through HMOs, so they focus on HMOs, then they see someone else is making good money through serviced accommodation so give that a try. – I’m not saying that any of these are bad strategies, I’m saying it is important to be focused on just one.
Location
Once you’ve decided on you’ve found your starting position, build up your knowledge, and devise a strategy, it is time to decide on where you should invest. Do you choose to invest locally or further afield?
The above is only a decision that you can make. In our opinion, it doesn’t really matter where it is that you invest. What does matter is trusting somebody who is in that area. Our clients often want a hands-free approach down to their busy jobs and lifestyles.
If you’re opting for the hands-free route, then the property could be anywhere! The important thing is finding someone that you can work with!
As with the strategy, it is important to be laser focused on the location. – Don’t purchase one buy-to-let in Hull, then one in Liverpool, then one in Aberdeen, then another in Belfast. – I appreciate, that they’re extreme examples but the point remains, become focused on just one area.
Your power team
Now that we have some knowledge, our strategy, and our location, it is time to build up our power team.
One of, if not the most important person to have in this team is your mortgage broker. Find a mortgage broker that understands your situation, your goals and can help you achieve them by accessing great products. – Find a broker that works with Buy-to-let investors!
Once you have established that relationship it’s important to keep building that team. Speak to local estate and letting agents who understand how the local market is moving and operating. This will pay you dividends when it comes to finding a managing agent also as relationships are the foundation of property investing.
Tradespeople such as plumbers, joiners, electricians, and builders will also play a part in this power team!
Finding deals
Now we have that sorted, it’s time to find ‘good deals’.
Everyone will have a different idea and interpretation of what a good deal looks like. For example, mine may be different from yours. I believe that it comes down to your experience, whether you’re already investing or not, your current financial situation as well as a multitude of other factors.
By building relationships with estate agents and property portfolio building services, they will help you understand how the market is, which ultimately plays a huge part in if this is a good deal or not.
I recently viewed a property, prior to COVID these properties where selling for between £60-£70,000 in a reasonable condition, however since COVID these prices have now risen to upwards of £80,000. Is it still a good deal?
Property portfolio builders have access to a wide range of stock, that may not be in the estate agents’ windows. So start building relationships and contacts, start having conversations and start building that team!
Taking action
The most important section of this article you’re going to read is… just start!
Just go and pick the phone up to an agent, arrange a viewing on that property, and run the numbers on some deals! Instead of putting it on the back burner or just thinking about it, start doing!
We meet investors who have been thinking of starting for 6, 18, 24 months but didn’t because they didn’t feel ready. – Unfortunately, there is no perfect time to start, today will do! You will learn so much more by being stuck in.
Summary
That’s our 7 considerations that you should make before starting a buy-to-let portfolio.
If you're ready to start looking for your first buy-to-let, get in touch with me today.
