Buy To Let Mortgages UK
Buy to let is one of the biggest markets in the UK; it is also one of the fastest growing areas of investment...
Basics of Growing a Buy To Let Portfolio
Once an investor has successfully purchased and managed one buy to let property, the natural progression is to consider an additional property or properties to create a portfolio. Whilst it is true that the lessons learnt from the first property will make the process of growing a portfolio easier and quicker, knowing how, when and why to grow a portfolio, nevertheless, requires a totally new set of skills.
Why Grow a Portfolio
The more properties that an investor owns, the easier it is to spread risk and to manage unforeseen circumstances. If you have an average void of 7 percent a year then, on average, you will have 25.5 days when the property is empty and no rent is being obtained. Consider a portfolio of 10 properties, each bringing in £600 a month. If the mortgage payments on all 10 properties are £450 each a month, it is possible that one property can be empty without the portfolio making any loss.
For example, monthly income is £6,000 and the monthly outgoings are £4,500. If one property is empty in any given month, the income from the portfolio becomes £5,400 and the monthly outgoings remain at £4,500. Although the profit is reduced, it is easy to see how a larger portfolio allows an investor to smooth the effect of unexpected costs and void periods.
When to Grow a Portfolio
This really is a personal choice and depends on the finances available and the time factor involved in sourcing a new property. Contact your lender and ask whether they will be prepared to advance you further cash, as this is likely to be the deciding factor. Generally, it is worth waiting at least one year. This is because you will then have dealt with most aspects of managing your original property, you will have gained a reputation with your lender of being a solid investor and it is possible that your original property will have gained sufficient capital value to allow for re-mortgaging which can be used to fund all or part of the next deposit.
How to Grow a Portfolio
One of the best ways of hedging your bets as a landlord is to spread your risk across several different markets. For example, if you currently have a professional flat for rent, why not add a student let, because these two properties will not suffer from the same fluctuations and are, therefore, much more likely to assist in the smoothing of any unpredicted costs.
Growing a portfolio is generally the next step for a keen property investor;
there are multiple benefits to growing a portfolio including spreading risks and maximising the experience gained from the first property; and
finances are likely to be the main issue when it comes to growing a portfolio; waiting until you have a reliable reputation with your lender will mean that you are likely to be offered more favourable terms.