subject: Grow Your Buy-to-let Portfolio Using Remortgaging As Your Main Financial Tool [print this page] Over the past twenty years, the buy to let industry went from strength to strength, with many people seeing huge profits year on year until it finally hit its peak three years ago, when the property market crashed and many landlords were left out of pocket and some even bankrupt.
In spite of this, it is still possible to earn healthy profits in the buy to let market, especially if you are in a good financial position, which many are not these days. Low risk mortgagees will find that they can easily make good money, especially as property prices in the UK are set to rise and keep rising over the next ten years.
Whilst it may not be as booming a market as it was in the early 2000s, buy to let property still offers excellent opportunities to make money. However, if you are planning to remortgage your own home to fund an investment purchase, or you plan to refinance existing investment properties to expand your portfolio, it is worth bearing in mind the mistakes made by many over recent years.
Encouraged by positive media coverage of the booming property market, it was not surprising that thousands of novice landlords entered the property market over the last decade. Unfortunately, many of them borrowed more than they could afford and, in some cases, more than the rental income the property generated. So, when the economy began to slide into recession, rental demand fell and landlords were left with empty properties generating no rental income.
It is still possible and in some cases a good idea to remortgage in order to fund a second property, but it is important to keep your feet firmly on the ground when making these decisions and only take on debts that you can afford to pay back. Ensure that if your buy to let is without tenants for a few months that you can still afford to keep paying the mortgage repayments.
It is a good idea to save some of your profits so that in harder times you have some backup funding. This will help you to avoid instances of being unable to pay the mortgage repayments.
In addition, it is worth making sure that you have a varied tenant base. Lots of landlords have relied on young professionals over the last decade or so whilst others have specialized in student properties. Having a diverse property portfolio and diverse tenant's means you are less likely to be affected by a downturn in one specific area, such as a reduction in student numbers.
Over forthcoming years, many students may cancel their plans to go to university when faced with thousands of pounds worth of tuition fees. Landlords in student areas may therefore suffer from a lack of demand as there will be fewer students searching for property in university towns.
It is vital that you consider how your property business will fare in both good and bad times. If you do plenty of research and know your market well, you are likely to be in a better position to maintain your business and to grow your income and capital over the medium to long term.
Always remember too that not only is your buy to let property at risk, so is your own home. Losing your home can be devastating and can severely affect your opportunities for credit in the future, so you may find it very difficult to obtain credit or a mortgage in the future if you don't keep up with repayments.
by: Howard Ogollegos
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