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How To Maintain a Portfolio Of BTL Properties?

Maintaining an attractive property portfolio helps investors however, property investments require time and effort and the first property investment will often be the hardest.

Applicants should start their journey with a small property investment with the help of an experienced broker, then start building a portfolio.

Investing in buy-to-let properties will help to achieve a potential profit at the time of sale. Take a look below for our top tips when growing your portfolio.

1. Awareness of stamp duty

Recently completed stamp duty holiday was a huge opportunity for people looking to save money on the cost of property purchases. Acting fast to take advantage of this helped people to grow their portfolio. In case a new stamp duty holiday is introduced in future, applicants should act fast with the help of a mortgage adviser to buy their BTL property.

2. Get a deal

Prior to making an investment decision, and if you are purchasing a property using a mortgage, it is essential to review the latest mortgage deals available.

The mortgage market is cyclical. It is necessary to identify the right time to invest in a property with the right mortgage deal. Mortgage advisers provides whole-of-market advice which will help you identify the best deals that are currently available.

3. No deposit

There can be situations where you desperately want to buy a property but have insufficient funds for a deposit. If such a situation arises, you can raise capital by leveraging your existing properties.

By re-mortgaging property, you currently own you can borrow additional funds which can be used as a deposit for another property. However, you should bear in mind that additional borrowing may increase the mortgage interest rate, based on any shift in the loan-to-value ratio.

4. Review your deals

There is a variety of mortgage deals available. Affordability tests for buy-to-let products will be based on rental income.

The terms of a mortgage are generally fixed for two or five years and the stress test applicable to a five-year mortgage will be lower than for a two-year mortgage. Interest rates can be fixed for a particular period or can be variable.

Due to the vast number of options available, discussing the deals that are available with a broker is an important consideration to be made.

5. EPC rating

An EPC – energy performance certificate – ranks properties in terms of energy efficiency. As of April 2018, properties with an energy rating below E are not eligible to be rented. This will have an impact on your buy-to-let plans, and mortgage, so be sure to check the EPC certificate before committing to an investment.

6. Finding property with better yield

Mortgage lenders will base their mortgage affordability decision on the rental income to be achieved from the property. Sometimes you may not be able to achieve a high enough rental income from the properties you wish to purchase.

You should conduct a thorough search on property valuations and rental valuations that can be achieved from properties you are interested in prior to making the investment decision.

It is always recommended you invest in properties that provide a high profit. Properties that yield positive cash flow (rental income minus property expenses and mortgage payments) will provide the leverage and equity that is required to invest in other properties.

Houses in multiple occupations (HMOs) provide a higher yield. However, there can be specific criteria that have to be adhered to for these properties.

7. Maintaining a balanced portfolio

It is important to maintain a balanced portfolio. For example, if the first property you buy provides a high rental yield, you might invest in another property that will provide high capital appreciation.

A landlord who has 4 or more properties is termed as a portfolio landlord. Some lenders would even require a business plan for the portfolio at the time of application.

It is recommended to obtain tax advice from an Accountant prior to investing in a buy to let property.

8. Tax on rental income from multiple properties

If you have several properties, all rental receipts and expenses can be lumped together, so expenses on one property can be deducted from receipts on another. However, if you own properties and also own a share of a rental business that profits from letting out properties, it’s important to note that these will be treated as two separate rental businesses – and you won’t be allowed to offset losses on one against profits from another.  

Similarly, overseas properties are treated separately to any properties you hold in the UK, so you can’t lump together your UK holiday let and your Spanish property. There’s a separate section in your tax return for declaring profits from overseas property.

You have to pay tax on the profits you make in each tax year – these run from 6 April to 5 April the following year. You must declare rental income for the tax year it’s due, even if you’re not paid until the tax year is over.  In terms of expenses, you can deduct any allowable expenses which relate to work done for a particular tax year – it doesn’t matter whether you pay the bill before or after the end of the tax year.

In conclusion, landlords like to work with an experienced mortgage adviser from the moment they purchase the first property. It helps them to plan their next purchase as the specialist mortgage advisers know how to reduce the cost of financing.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments.

For more info visit site: https://imbonline.co.uk

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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