The last three years has seen some huge changes in the BTL landscape. Primarily stamp duty increases for second properties and the introduction of section 24. These changes have undoubtedly deterred potential new landlords into entering the market. Despite this, there are many reasons to become a landlord and to build a portfolio of properties.
Before entering into the market and considering portfolio building it is vital to do as much research as possible. Many factors must be considered such as area of investment and knowledge of said area, taxation, property maintenance and finance propositions. Spending the time to research all is vital as these factors can affect the revenue generated from your portfolio.
Due to changes in BTL taxation it is vital to receive advice from a professional accountant. Preferably the accountant will have extensive knowledge of property related tax issues. Guidance can be given in respect to the ownership of the property, either limited company ownership or personal ownership dependant on your current tax position. Correct advice will maximise the profits you can make as you build the portfolio.
You also must consider what strategy to employ when building your portfolio. An entry level property would usually be a single let property. Beyond this HMO’s (house in multiple occupancy) can be considered as they generate more income in respect to cashflow. However, HMO’s are more complicated in respect to the management of the property and this may lead to higher costs. It would be advisable to employ the services of a management company or letting agent.
Semi commercial properties and fully commercial properties can be considered as well to add more diversity to the portfolio. Lending against these types of properties usually involves proving experience of being a BTL investor to the lender, in some instances this can be 2 years. A sound business plan may also be required.
The main benefit of building the portfolio is receiving income from your tenants. As the portfolio builds more income is generated as the number of properties and tenants increases. If HMO’s are in the portfolio this can also further increase the income generated as well. Dependent on house prices and economic conditions the properties held within the portfolio can increase in value. The properties can provide additional income whilst you are working and a primary source of income when retired.
Remember that BTL investment has its costs. Landlords have obligations to maintain the property, there may be void periods with no rent and, of course, property values can fall.
A Move brokers can help in financing the portfolio. We have access to lenders who offer BTL mortgages, bridging finance, limited company mortgages HMO and commercial and semi commercial mortgages.
Free initial advice and always pressure free….
As a mortgage is secured against your property, it may be repossessed if you do not keep up the mortgage repayments.
Please note that tax legislation can and does change and may do so in the future.
This article is for information only. No advice should be construed from it. You should always take independent advice prior to taking any action.