Over the years, we’ve seen an increase in property investing, despite the government’s attempt to slow landlords down. The introduction of stamp duty and changes in tax has only highlighted why property is such a good investment. With stock market volatility and an ever increasing rental demand, investing in property is becoming ever more attractive to investors.

1. Use equity to expand your portfolio

Many landlords have amassed sizeable portfolios over the years and have actually invested little of their own money in. The way investors do this is primarily through using equity tied up in properties that they own. For instance, a property purchased 5-10 years ago may have increased in value. The additional equity can then be drawn out through a remortgage and used as a deposit to buy another home.

As an investors property portfolio increases, the chances of using equity also increase. This is because rather than remortgage a large amount from one home, investors are able to remortgage smaller amounts across several properties. For instance, rather than withdraw £20,000 equity from one property, if able, can remortgage £5k across 4 properties. The main advantage here is that properties will take a lot longer to gain £20,000 in value as opposed to £5,000 in value.
The lesson here is that property investment can be a marathon. Growing a portfolio can take years, but once you have several properties you should be able to increase your portfolio size quicker than you’ve previously been able to.

 

2. Spread your investment net

Some investors may choose to invest in one city, one country or decide to spread their net and invest globally. A large number of successful investors tend to invest in areas and cities where they understand property prices in great detail. For instance, if you live in a certain city, then you’re more likely to understand the house prices a lot better in a comparison to a city 200 miles away. That said, if you’re comfortable investing in a certain city, then do try and spread your net across the city.

Areas can fluctuate in property prices. A new school or a bad school review can soon bring demand and desirability down. On the other hand, a school rising in reputation can be great for property prices.
Spreading your investment net is a lot safer than maybe owning several properties on one street. This way, if one area is declining, you can offload the properties and maybe purchase in an area you see that is rising quite well.

 

3. Choose the right mortgage type

Many investors tend to opt for interest only mortgages in comparison to repayment mortgages. This is because interest only mortgages allow investors to cash flow a lot more each month. An interest only mortgage is where the interest is repaid on the mortgage, but not the mortgage itself. The mortgage is only repaid at the end of the term and usually once the investor sells the property.

Increased cash flow each month allows investors to increase their profits. In turn, investors can then use the surplus funds to invest further and create a ‘snowball’ effect. Repayment mortgages are where the mortgage is repaid in addition to the interest. This can result in little or no cash flow each month. The advantage of repayment mortgages is that at the end of the term the property will be owned outright.

Investors with sizeable portfolios may tend to have the majority of their properties on interest only mortgages but then have a smaller amount on repayment mortgages. This is mainly to provide a pension fund and to hold their best prized properties rather than selling them at the end of their mortgage terms.

 

4. Use experts in the field

Utilising the experience and expertise of professionals can pay huge dividends. With such a large amount of money involved, it makes sense to use professionals and avoid making mistakes which can prove costly.

Professionals such as reputable letting agents to manage the rental of the property will ensure that legislation is met and that the tenancy is managed in the best way possible. Often investors will tend to try and save management fees, but due to inexperience can cost them a lot more money in the long run. Investors can also make novice mistakes costing them time and causing huge frustrations.

Mortgage advisors can also help to maximise profits generated from property investment. This is because mortgage brokers can ensure you’re getting the best possible mortgage deal. Over a number of years, this could save investors thousands of pounds. If mortgage rates go up due a term expiring, then brokers are usually quick to cherry pick you another great deal to keep your payments as low as possible. Approaching lenders yourself perhaps isn’t the best route as you’ll only ever see that particular lenders deals. This severely hampers your chances of finding the most suitable mortgage for yourself.

For more tips and advise on property investments visit: ExpertMortgageAdvisor.co.uk