Property Wealth – How

In the third of our series on property wealth we consider the financial strategies that could be used to grow a property portfolio. If you own and rent out property HMRC will see this as a business and you should treat it in the same way, using planning and investment strategies as you would for a business.

Whatever your reasons for building a property portfolio, once you have set your goals you will need to carefully consider the strategy and tools you will use to increase your property wealth.

Property investors generally use one of three strategies;

• Funding their portfolio from their salary, other business income or from savings
• Funding their portfolio from property growth and refinancing, or
• Using funding from existing rental income.

Depending on your circumstances you are likely to choose one or a combination of these strategies. You can initially release the equity in a current home or use savings to pay a deposit on a second or third property and use a buy-to-let mortgage to finance the rest. As your business grows, you will be able to reinvest some or all of the rent that you receive into further properties.

If you are looking at using a mortgage to expand your business you are likely to need at least a 25% deposit for each property. The bank will also want to know how much rental income you are likely to receive from the property before they will lend you any money.

Roughly calculate how much you can afford to borrow by using an online mortgage repayment calculator. Many of the banks websites also have a mortgage overpayment calculator which easily shows you how much you could save by paying a bit extra on your mortgage every month and we have blogged before about how to calculate a property’s rental yield using the calculation ‘monthly rent x 12 / investment x 100 = %.’

Fees for buy-to-let mortgages can be hefty and it is worth noting that they could become more expensive from this month. Rules are changing and the work for lenders is likely to increase due to the fact that any landlord that has four or more mortgaged buy-to-let properties will be required to submit income and mortgage details on all of them every time they want to refinance one of them.

To find the best deal for you we recommend that you speak to a financial advisor but comparison websites like moneyfacts, Money Saving Expert, MoneySuperMarket and Which? are all good places to start looking. They will each have different results so you must check two or three of them before making any decisions.

For further information about how to grow your property portfolio you can talk to the team at New Mills Properties on 01472 360178 and they will be happy to offer you guidance on how to get started.