You are on the right track, but some things to consider.
1) Building /hosting your portfolio sites ( or copies of them) will let you have control over what you show to potential clients. That is you will be able to show your BEST WORK and not work that's been tweaked or tamperedbny the client or by client request after the "design honeymoon" passes.
2) It also will allow you to push your envelope. That is can be a learning project and as well as a showcase.
3) Remember , There are portfolio pieces ( your BEST work) and Reference pieces ( work that shows how well you can constantly work with clients, clients' personalities, and client constraints) Doing "charity work" may have other rewards but more often than not ends up beign REFERENCE and not PORTFOLIO work. It also sets a precedence; a corporate firm is not going to be moved by getting reference from a charity or small business and a small biz won't quite know how to deal with a reference from a fortune 500 company.
4) Keep in mind that many clients do have there own businesses and lives so it's not like that will be standing by the phone waiting to tell others how satisfied they were with your work ( even if you wowed them).
5)Also what gets 'accidentally' passed around is that you did a site or three for free, others will want the same deal.
So for references pick a person with whom YOU PERSONALLY CONNECT and whose work comes closest to the kind of client you want to get.
Another good strategy is a "how I would have site" You can take an existing real company's page and revamp it the way you would have done if they had hired you. Unless you are also selling marketing and/or copy writing , it's advisable the content MUST BE OVIOUS PLACE HOLDERS to avoid any legal issues. Doing a site like this for your portfolio has the distinct advantage that it shows DIRECTLY how you would solve design problems that prospective clients may be facing.
hope that helps, good luck.