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  • Writer's pictureThe Cedar Crest Team

How To Build Your Property Portfolio

The Property Snowball Effect: From the Expat Investor Hub Podcast- October 2023


property portfolio


The beginning of any journey starts with a single step and often it’s that first step that is the most difficult. But once you get moving, momentum can help move you forward and even increase your pace. That’s exactly what the snowball effect is and in today’s episode of the Expat Investor Hub podcast, that’s what Sam Harley, Cedar Crest mortgage adviser and Dan Riedo, podcast lead and host, are discussing.

Click here to listen to the full podcast:

"We try to have a look at what's happening around the market to help keep you up to date.

This week, a couple of banks have made the news with stories that they have relaxed some of their criteria for Buy-to-let properties and portfolio landlords ,but actually it's something we're seeing across all markets.

The Mortgage Works, which is the biggest lender, they're doing it so you'd expect everyone else to be following suit. The Mortgage Works in particular have decided to increase their maximum loan-to-value for portfolio landlords which is people with more than 10 buy-to-let properties. They've increased the maximum lending from 65% to 75%, quite a big increase which is signalling banks' intention to still lend money to people but also I think what is more important for investors is a reduction in the stress test rate.


For buy-to-let lending, your rental income needs to be covering the mortgage interest within a certain assumed stress rate and what the Mortgage Works have done is actually reduced that stress rate so it makes borrowing the desired amounts much easier. Mortgage Works are looking at loan-to-value ratios back at 75% which is typical for a buy-to-let property which means that if they've been doing at 65% it shows that difficult lending conditions have existed over the past 12 months or so.

At the beginning of this interest rate hike cycle, many banks restricted their criteria and made lending more difficult because there was more uncertainty about how the interest rates were going to behave so the banks wanted to be more conservative as the Mortgage Works are one of the largest buy-to-let lenders in the UK. This is a strong positive signal of returning to more normal times and it's not just Mortgage Works that are doing this, we are seeing banks and lenders across the market relax their criteria in some ways. Whilst they might not be able to drop interest rates a huge amount right now, they're finding ways to make borrowing easier such as reducing stress test rates or relaxing the requirements around the bias circumstances.

snowball effect


Building a 5, 10 or 20 property portfolio might seem like a huge undertaking, and it is, but like any journey ,it starts with a single step and in theory, on this journey, each step you take should be slightly easier especially when you grasp what the snowball effect is all about.

This is basically the concept of acquiring that first property with a consistent method of saving and then adding to it any subsequent rental returns or capital growth to help pelt them forward into property number two and then property number three and creating this big snowball that is your property portfolio.

It's as simple as imagining a small snowball being rolled down a hill. At first, progress is really really slow, month after month of continuous saving just to get that deposit together to get that first property. Over time, it slowly accumulates so you require property number one but you keep saving you keep going and it continues to grow in size and speed with property number two coming through, property number three coming through, then over time you've got a portfolio of properties generating momentum moving forward, getting bigger and bigger. Obviously that first property is the most challenging. Your snowball is really really small. All it is, is savings coming together month after month to create that first initial snowball that you'll begin to roll down the hill, as I just said, once in motion, in theory each step should become slightly easier.



Let's start with laying the foundation: the first property investment which is probably the biggest leap of faith. The first property is your springboard and sets the scene for everything you’ll do from that point. With it being your first investment, it might require significantly more levels of research and courage compared to future purchases and maybe a higher level of capital as some people might choose to make their first purchase just in cash as they feel more comfortable with that. It also leaves more capital to play with if you choose to refinance later from a fully paid property. It may even be a larger obstacle for Expats as there are a few other Expat specific issues that would need to be overcome if you’re not living in the UK at the time such as navigating the nuances of purchasing remotely, understanding local regulations may be if you're not a UK citizen, and possibly dealing with unfavourable exchange rates or other foreigner specific restrictions but that is where Cedar Crest is here to help.

Mortgage advice for property landlords

Now before you start enjoying that rental income coming through, you've got to get together your initial pot of capital whether that's in the form of a deposit or you want to buy it outright in cash. This is just utilising the power of consistency, putting away those savings each and every month to get to the point of buying that first property and developing a habit of consistent savings is laying the groundwork for the future investments. It also gives you the ability to build up a reserve for unforeseen expenses and help prepare for the next property purchase when you reach that initial goal of requiring that first rental property. With that first rental property, should come that first bit of passive income of the rental income stream. This should be enough to more than cover the properties expenses and whatever's left over, can be added to the savings to help accelerate the pace at which you can invest in more properties.


Once you have maybe one or two properties in place and you're getting that consistent rental coming in, the next step to supercharge that snowball effect is refinancing. By refinancing, meaning using a mortgage to release some of the equity that you put into the property and possibly if that property has grown in value, you're able to release some of that growth as well. You can use that to purchase more property without using your existing savings. with each new property that you add to your portfolio, you're increasing your opportunities to be able to achieve exponential growth on your wealth from property investments.

It's not only equity that you're able to release over time but also each property that you're purchasing is adding layers of rental income which compounds everything further.


Once you've got those first couple of properties under your belt, this is where things can become easier. We're not saying it's easy, we're just saying it's easier than when you started. Having a combination of income streams now, so you've got your regular savings that you should be consistently putting away and then you've got a couple of rental income streams that are coming in each and every month and both of those income streams should be covering any expenses to do with the property.

You've now got one, two, three properties that every couple of years you can extract any equity out to build the fund for another purchase. Not only is it the portfolio in your world that is snowballing, it's your experience too so you've gone through the process of researching and due diligence and the buying process and you've got your people on the ground set up to help make these transactions and the management of these properties as easy as possible, especially when you're living abroad.



It might sound like we are repeating ourselves but that's exactly the point of the snowball effect. The next stage is reinvesting rental profits. Whilst having that extra income from a property can be used to enjoy a better lifestyle and many people do that in the long run, you're going to limit the effect of the snowball effect if you're not reinvesting it. By reinvesting rental profits, your surplus rental income can be combined with any other savings that you have to keep accumulating properties even faster. By reinvesting rental income rather than waiting a year to save for the next property, it might bring that forward a few months.

What we're getting at really here is the power of compound growth, as rental profits are earned and reinvested, they then generate their own returns which generates more rental income which can be used to buy more property.


It may sound like this is really easy to achieve in a short amount of time but I can't stress enough that property wealth is not a short-term game, it is a long-term game and only those who stay committed to it for the long-term, will experience the power of the snowball effect.

It doesn't happen overnight when I think back to my first purchase. It took me a long time to save up that deposit. We're talking months of working six to seven days a week, putting away every little bit of surplus income that I could to get for that first property, and it felt good making that first purchase but at the time I thought I was going back to zero. I'll have to start all over again but I made sure to keep consistent with my savings ,I made sure to hang on to every little bit of that rental income that was coming through, and then as time went on, my savings, and my rental income that was coming in, I was able to release a little bit of equity from the property.

I got into that second property a lot quicker and as we have just been talking about, I followed the same process and that third property came along even quicker. All whilst my knowledge was building and my experience kept growing, I was getting faster at discussing properties. I understood the areas I was investing in, I got a better understanding of the tenants and the people I was renting properties to and as a whole, the process got a lot simpler and a lot easier to execute so by remaining consistent over the long-term, the snowball which started out with literally just a few hundred pounds to begin with, slowly evolved into a property portfolio that was profitable."



Get in touch with one of our mortgage advisers today to learn more about your mortgage options.

Cedar Crest Ltd – telephone UK T: +44 (0) 203 883 1017,

HK T: +852 6645 4462 – email 

Your home may be repossessed if you do not keep up with repayments.

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