How to build a property portfolio
The first step is to have an investment strategy and create a business plan
The first step is to have an investment strategy and create a business plan. You should have a good idea of the financial and lifestyle goals you’re aiming for and work out the time it’s likely to take and the money you’ll have to invest to get you there.
For each property purchase, assuming you are a lower rate tax payer, you could expect to have to invest a minimum of around £83,000:
25% deposit on a property worth £260,000 (average) £65,000
Stamp duty (£10,000 at five per cent, £260,000 at three per cent £8,300
Other buying costs (legals, survey, mortgage fees, etc.) £5,000
‘Ready to rent’ costs (assuming only light redecoration required) £3,000 White goods £1,700
(Also see our ultimate guide to preparing your property to let)
If you are furnishing the property or it is an HMO, then you should expect to have to invest another £20,000-£30,000.
If you are a higher rate tax payer, you may have to invest a lot more, depending on the rent to mortgage ratio – in some cases you may require a 40 to 50% deposit.
Discuss your investment objectives with a wealth manager or financial adviser, who can look at all your income and investments and advise you on how best to move forward with a property portfolio
Speak to a legal professional who can help make sure you own and pass on your property assets in the best way
Consult a property tax specialist. Even if your wealth manager or financial adviser knows something about property tax, it is a particularly complicated area, so it’s well worth taking advice from a specialist before buying
Also make sure you prepare a Lasting Power of Attorney and will to make sure if anything happens to you, the properties can still be looked after. It’s also not easy to leave property tax efficiently, so do take specialist will and trust advice.
If you don’t take these important first steps, you could end up with inheritance issues and paying more tax than necessary.
For more on creating a property investment strategy, see our ultimate guide to buy to let property investment, and to find out all about taxation for landlords, see our dedicated guide.
Well Prepared
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