how the portfolio builder works

property portfolio builder picture

Step 1: Sign the Portfolio Builder Agreement
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

After completion of money laundering checks, the Portfolio Builder Agreement contract is agreed and signed by the investor and one of the partners of Adavo Property.

Step 2: Set the agreed capital aside
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

In this example £59,000 is allocated by the investor for the property purchase, renovation and all fees. The funds remain in your account throughout the buying process. All that we ask is that you prove funds via your solicitor and are available to release the funds as they become due. Funds to purchase and renovate the property can only be released in accordance with the terms and conditions set out in the Portfolio Builder Agreement. The property is typically bought for cash (for speed) although a mortgaged version of the Portfolio Builder Investment is also possible subject to lender and the client's credit status.

Step 3: Allocate a suitable property
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

The next suitable property available is allocated to this specific Portfolio Builder Agreement and its purchase is progressed. Professional fees relating to the purchase (such as RICS survey fees, searches etc) are drawn down in accordance with the terms of the agreement. The property will be approximately £70,000-£75,000 in value (confirmed by an independent RICS valuation) and we will aim to buy it at a 20-30% discount. This will typically mean an expected purchase price of approximately £40,000-£50,000 which will leave the remaining funds available for renovation costs, fees and contingency. We always keep the total capital outlay within the budget set out in Step 1.

Step 4: Complete the property purchase
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

Once all RICS valuations, surveys, report on title, searches etc have been returned without issue and the conveyancing work has been carried out, we then complete the purchase in the investor’s name. The necessary funds are drawn down via your solicitor and the Portfolio Builder client's sole legal title to the property is established on completion of the purchase.

Step 5: Renovate the property
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

The renovation works take place over a 4 week period and typically increase the value of the property by around 10-15%. The renovation fees in this example would be expected to come in around £5,000-£10,000 ensuring that the £59,000 set out in the Portfolio Builder agreement will be able to cover all costs associated with the process. No renovation costs are payable upfront. Due to the strength of Adavo's cashflow we undertake the work with no money upfront and only invoice upon completion of works. All clients are welcome to visit the property throughout the process and check up on progress. We charge a £1,000 project management fee and a £1,000 contingency. In return we fix the price of the renovation giving you certainty of completion and cost.

Step 6: Sign off completed works
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

We invite each client to visit the property upon completion of works. At this stage all renovation works will have been completed including a full snagging schedule to ensure our quality standards are met. The property will be fully furnished with white goods and soft furnishings. Once you are happy with the work completed we sign off the property and invoice our renovation costs and fees. At this stage you can expect that the property is worth around £10,000-£15,000 more than the total capital outlay and is ready to let immediately.

Step 7: Actively market the property to let
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

Your lettings service begins as soon as the property is signed off and the renovation fees are paid. We begin to market the property for lettings during the renovation stage and will aim to let the finished property from the renovation completion date. While this is often the case sometimes it can take 1-2 months to find tenants for the property. During this time we offer a guarantee to cover any initial mortgage shortfall. Our lettings figures include void periods as well as tenant find fees and lettings management charges.

We market the property via the open market, existing networks and partners. In each city we partner with 10-12 local lettings agents as well as placing adverts on all major websites. A well presented property in show home condition is expected to let well year on year. Our rental target is agreed in advance and we usually let the property within 4 weeks of renovation completion due to strong demand for good quality stock.

Step 8: Lettings management
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

Once the tenants have been found we offer a full management service to make the investment entirely hands off. We produce a full inventory, manage any general issues (including rent collections etc) and handle check-ins/check-outs. The client is free at this stage to use any lettings partner they chose so we consider ourselves in competition and try to deliver a lettings service that stands out.

Step 9: Re-mortgage to pull cash back out
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

Once the property is renovated and rented we will look to arrange a re-mortgage at the end valuation and pull the majority of the capital back out of the deal. This is usually via a 75%LTV mortgage although it depends on the mortgages available and each clients credit status. Typically it will leave between £5,000-£15,000 of net investment. In this example we re-mortgaged the property at 75% of an end value of £70,000 to give £52,500 back to the client leaving a net £7,078 investment level. The geared return was over 30% (a net income per annum of £2,140 after all costs vs £7,078 net investment).

Most of our clients re-invest on a rolling basis. Investors can opt to buy one property to begin with while you get comfortable with the process and quality of service and then expand from there or alternatively we can run undertake several properties at once to speed up creation of a substantial income-generating portfolio.

Step 10: Reap the rewards
Example: £59,000 Total Capital Outlay, 3 Month Process, 1 House Agreement.

At the end of the process you will have a significant amount of equity profit and a very good return (15%-30%+) against your net investment after re-mortgage. The ultimate goal is to then keep going and build a property portfolio with a large, passive income coming in month after month. The equity profit will add up with each property purchased and you can look forward to long term capital growth alongside your passive monthly income. A property portfolio from Adavo offers the best of both worlds - good capital gains and good monthly income. Each Portfolio Builder agreement lasts as long as you want it to and, if you are happy to, can entail dozens of properties over several years.

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