Is now a good time to build a buy-to-let portfolio?

4th October 2019

couple with paperwork and an adviser

If you’ve been looking to invest in property over the last few years you’ll no doubt have come across a host of challenges thanks to changes introduced by the government.

One of the biggest is that if you buy a second home you now have to pay a 3% higher rate of stamp duty, which makes the initial transaction significantly more expensive.

Some tax reliefs have also been stripped back, from the money you could reclaim on replacing items in the home to the interest paid on any buy-to-let mortgage used to buy the home.

The changes have meant that some investors have found it more difficult to make a profit and have decided to sell up either part or all of their portfolio.

One in four landlords were looking to sell at least one property over the next 12 months, according to a study. (1)

Some landlords are still confident

But while some property investors have decided to step back, there are plenty more who are sticking to their guns or even expanding their portfolios.

A 2019 survey of 19,000 landlords found that: (2)

  • 73% reckon property is the best, least volatile long-term investment

  • 83% said they were either unlikely or very unlikely to sell a property over the next year

  • 58% said they intended to stay put for the next five years

The landlord opportunity

The fact remains that a lot of people in the UK are in no position to buy their own home, but still need somewhere to live.

So, as long as you find the right location - at the right price - you could still make money from buy-to-let.

House prices have been stagnant for a while now. According to the Office for National Statistics, average house prices in the UK increased by 0.7% in the year to July 2019, down from 1.4% in June 2019. This is the lowest annual rate since September 2012, when it was 0.4%. (3)

Brexit house price chart

Some regions, like London, the South East and the South West, have seen prices fall over the last year. This may have made them more affordable and attractive to would-be landlords who want to take a long-term approach.

And if you buy a property from a landlord, you’ll know what to expect to make in rent each month. You could even buy somewhere with existing tenants in place.

Another important thing to think about is how you want to buy. While many landlords buy investment properties in their own name, increasing numbers are now doing it through a limited company they’ve set up.

This is because of tax advantages, particularly if you’re building a portfolio of properties rather than investing in a single home.

It’s worth discussing this with a tax adviser and your mortgage broker first.

Decide what you want from your portfolio

When building a buy-to-let portfolio, consider how you plan to make money from the properties.

For example, you might be hoping that their value increases significantly.

However, depending on where you buy, the value of your properties might not rise much, but they may enjoy stronger rental growth.

Finding a buy-to-let mortgage

If you want to find a buy-to-let mortgage, whether to buy a property in your own name or through a limited company, the good news is that there’s plenty of choice.

There are now lots of lenders active in the market, from high street lenders to less well known names such as Bluestone, Kensington and Kent Reliance.

This is one area where a good broker can really come into their own. Some of the best buy-to-let mortgages are offered by lenders that don’t lend directly to borrowers - you can only get those rates if you go through a broker.

Is it a good idea to build a buy-to-let portfolio?

“Some investors continue to make excellent returns from their property investments, having taken the time to research the area they were buying in to make sure there’s solid demand from tenants,” said Prakash Patel, a Mortgage Adviser at Trussle.

“The fact that buy-to-let mortgage rates have fallen in recent years, as they have with residential mortgages, has also helped many landlords enjoy a good return.

“However, life as a landlord isn’t for everyone. There are lots of questions to answer before embarking on building a buy-to-let portfolio, from how you want to buy those properties to how you plan to manage them.

“While you may be able to be hands-on with a single property, you may need to use a letting agent as your portfolio grows or if you buy a property some distance from your own home.”


(1) Residential Landlords Association

(2) Benham & Reeves

(3) Office for National Statistics

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