Property Portfolio Acquisition

Property acquisition refers to the process of acquiring ownership or rights over a property or a real estate. To acquire ownership over any property, the interested party would first do their research in order to find a suitable property. Some people choose to complete this step themselves while others hire an agent to do it for them. Oftentimes, having an agent work on your behalf results in having access to a larger pool of properties and contacts which may be helpful later down the line.
The next step is all about completing your due diligence, which is a crucial step and involves various examinations of the property, verification of the rental yield, an analysis of environmental issues and legal verification, amongst other things.
Even before the completion of all of these examinations, if the property valuation has been done, the buyer may choose to put in a written offer for the house. If an agent is involved, they would take care of this step, and potentially enter into negotiations with the seller to arrive at the best price for the buyer on whose behalf they are working. If a price can be agreed the contracts can be exchanged.

The amount of capital required to invest in a property in the UK will largely depend on the type of property you are planning to buy and its location. As an investor you also need to consider some of the one-off payments that come with the purchase, such as stamp duty tax or solicitors fees.

The initial investments will vary depending on the property and method of investment. If you’re buying a buy-to-let property using a mortgage your deposit will need to be at least 25% of the purchase price. Similar figures, with added on-going costs will apply to serviced accommodation. However, if you were to invest in student accommodation, you will require 100% of the purchase price in cash and so your initial investment may need to be a lot higher.

Property acquisition cost is the total cost involved in the process of acquiring a property. Calculating the total cost which includes the actual price of the property as well as all the fees associated with its purchase is an important step in the real estate acquisition process. Arriving at this number allows you to budget and plan for a purchase without any last minute surprises. When calculating the property acquisition cost the different costs, apart from the price, that you may add include the legal fees, survey fees, stamp duty tax, which will differ depending on the property value, property type and whether you’ve bought a property before or not, as well as any refurbishment costs you might need to cover.

There are several ways in which you can raise money for a property portfolio and each of them comes with a different amount of risk requiring you to complete your due diligence.

One creative and less known method to raise finance is by using vendor finance, whereby the seller allows the buyer to pay the price over time. This is possible when the seller is motivated to sell the property fast but may not necessarily need the full amount all at once.

For those property investors with ample amount of time on their hands, property sourcing and selling packaged deals to other investors for a fee may be another way to raise finance in order to add a property to their own portfolio.
Building trust relationships with people in the industry may open doors to raising finance with angel investors, who depending on the attractiveness of the deal may be willing to put in large sums of their own money.

Investors who are under pressure to raise finance fast and have no option to use a traditional mortgage, which may be the case when purchasing via an auction, can apply for a bridging loan. It’s important to consider all the costs and charges of a bridging loan as it may prove a costly option when not planned well.

Apart from the above methods, as well as releasing equity from your own property, there are a few other techniques that help to raise funds. Most popular include creating a joint venture with someone who has the funds, opting in for a shared ownership property or using crowdfunding platforms.

Savvy investors are able to leverage knowledge of the market and legislation to build an entire portfolio of properties using just one single deposit. The strategy many of them use is something called “two plus one strategy”. What this means is that if the investor has three properties, they should be ready to sell two and keep one, or keep two and sell one. In this way there is always a way to keep bringing money back into your pot and keep reinvesting it into new properties and effectively growing your portfolio. By using your initial investment to purchase three properties at once, rather than putting your entire deposit into one single property, you avoid waiting for that one property to grow in value before you are ready to refinance or sell it without making a loss. When you apply the “two plus one strategy” and always have at least one property to sell, you are able to increase your pot of money, which you can reinvest into new properties to grow your portfolio. Once you learn the process all you need to do is just repeat it a few times until you have a sizable portfolio that generates you the passive income you set out to achieve.