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Top tips for expanding your portfolio

If you’ve been successfully managing a buy to let property for some time then you may be thinking about expanding your portfolio.

This guide will give you some pointers about what you need to think about before growing your buy-to-let property portfolio empire.
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Do your homework

Before expanding your property portfolio you should take some time to assess how things are going and your current situation. Firstly, work out if buying another property makes financial sense. House prices, rental income, tax laws and interest rates could all have changed since you bought your first property so spend some time going through the numbers to calculate whether it’s worth it. Your accountant or mortgage lender should be able to help you with the figures you need and spend some time investigating the rental market particularly in the location you are thinking of expanding into. Keep an eye out for up and coming property hotspots.

Diversify or monopolize?

You have a couple of options when buying your next property? Do you step out of your comfort zone and try something different or do you keep on doing what you know best? With so many different types of properties in different locations, each suitable for different types of tenants; you may find it beneficial, after seeking advice to have a mixture of property types in your portfolio. Alternatively you could specialize in one market or location? Perhaps you want to become known as the go-to-landlord in your local university town. By sticking to what you know and buying similar kinds of property you may also be able to take advantage of deals when it comes to bulk buying things like paint, flooring, furnishings and bathroom and kitchen fittings. Whatever you decide, it is a good idea to talk to your Aldermore adviser first.

Treat it as a business

Before you get carried away expanding your portfolio you need to be sure that it’s the right thing to do. Managing one property may not take up much of your time, particularly if you have a letting agent, but once you start to own more, then not only is it going to take up more time, your expenses will go up and so will your risk. With your first couple of properties you may have been able to hold down other employment but if you’re serious about expansion then you may want to consider making this your full time job. Being self-employed means being in charge of your destiny but think about who covers for you when you want a well-earned break.

Not for investment

Although you could make a big profit when it comes to selling your buy to let properties you should not primarily think of your portfolio as an investment. The immediate concern of owning a buy to let portfolio is to bring in a regular income. Lenders quite rightly don’t support speculation and you will need to prove to them that you have the means of covering your mortgage as well as the other expenses associated with managing buy-to-let properties. Having said that, the long-term returns on buy-to-let properties can be very good, but remember house prices can go down as well as up so you should regularly review your business plan and portfolio.

Something for a rainy day

As with all businesses unexpected things may crop up and with more properties there is more risk of them being empty at some point. Even one month with no rental income could be a real drain on your finances. Building up a decent sized pot of cash could also be useful if a property comes on the market and you want to move quickly. You may not be in a position to borrow as much or as fast as you need and having some spare cash means you can snap up that bargain.

Going, going, gone

Landlords will often sell their portfolios at auction because of the ease of selling and these properties are ideal to go after as you should have a good feel as to whether they will make good rental properties. Always do your research before buying at auction and although you can often get a property at a great price it is possible to pay over the odds, particularly if you become embroiled in a bidding war. Set your maximum price and stick to it.

Buddy up

One of the options to help you expand your empire fast is to find a partner to go into business with. This could be an investment partner who can help you raise the capital you need to grow your portfolio. Or it could be someone who can help you manage your properties such as a tradesman who can work on renovations and onsite repairs.

If you’re setting up a partnership it’s essential you take professional advice from the beginning. As well as choosing a name and registering with HMRC you’ll need to understand the rules and differences between Limited Liability Partnerships and a Company and adhere to them.

If you'd like to get the ball rolling or have any questions, give us a call on 0333 3211000

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