Building a buy-to-let property portfolio

Investing in property is a popular way of protecting your financial future. If you are thinking of building a buy-to-let portfolio, there are several considerations that will determine your success.

Finding the right buy-to-let property requires research

As with any investment decision, research is a must. Before making an offer, you need to find out the answers to the key questions outlined below.

  • Which areas attract the largest volumes of tenants?

Minimising the periods when your property is vacant will help you to maximise your rental revenue and boost your cash flow.

Locations that are popular with tenants include those that are proximate to city centres and large employers. If you wish to let to students (see below), you will of course buy property close to a place of higher education. Idyllic country homes that attract older home-movers are less likely to see high demand from tenants.

When companies move into a new area, upmarket shops open and local government begins investing in infrastructure and regeneration, it is a sign that an area is up and coming.

Top tip: Look on property portals such as Prime Location, Rightmove and Zoopla to see how long properties in your target area have been on the market.

  • What type of property is most popular with your target demographic?

What could otherwise be an enticing feature may be wasted on a target audience who won’t benefit from it. Young professionals, for instance, spend a lot of their time away from their home working or socialising. For them, a high-maintenance garden is unlikely to be a big draw.

A family with young children, on the other hand, will welcome an outdoor space. But they might not be so keen sharing an area of town with several noisy bars, something that might appeal to a young professional.

Top tip: Try to find a property that would appeal to more than one demographic to increase your pool of potential tenants. 

  • Should you buy cheaper or more upmarket property?

If you wish to build a portfolio in a short space of time, high-value property is less appealing. Your capital may be better spread across two or more low-to mid-range properties. Each property will hedge against expenditures on the others, such as repairs and voids. And, if you invest in the right area, your initial yield may be larger.

Top tip: Use our rental yield calculator to compare the earning potential of your shortlisted properties. 

  • What is the market rent for the location and type of property?

Before making a decision, look at the rents charged for comparable properties in the area. Again, online property portals are ideal for this sort of research.

The more thorough your analysis, the better. You need to be sure that your income expectations are realistic.

Top tip: Use our buy-to-let rent calculator to find out how much rent you will need to support your mortgage.

Generating income from BMV buys and renovations

Investors often look for properties that can generate above-average rental returns. This includes below-market-value (BMV) properties and those to which the buyer can add value themselves, through refurbishment and/or renovation.

Received wisdom in property investment is to ‘buy the worst house on the best street’. You can add value to run-down properties by bringing them in line with their neighbours. In the right circumstances, the combined cost of the property and the renovation work should be less than the post-work value, saving you money and increasing your rental yields.

Find out more about estimating the value added through renovation.

Adding value also increases your equity. This might give you the option to switch to a more competitive mortgage, or release cash for further investment.

Sometimes a property is so dilapidated that a buy-to-let lender will not finance it. In these cases, you may need a bridging loan to cover the cost of the transaction and renovation work.

Enquire about a bridging loan today

Help getting the most out of your capital

The mortgage advice team at Commercial Trust doesn’t just help you find the best buy-to-let mortgage. With their hands-on experience in the marketplace, the advisors can also help you develop your strategy for building a property portfolio and using your capital to best effect.

There is no ‘right way’ to invest. A lot will depend on your plans for your portfolio and your own life goals. This is where an in-depth consultation with a buy-to-let mortgage advisor can be invaluable. The care we take to account for your circumstances is what we believe sets us apart from our competitors.

To get in touch today, call us on the number above or fill in our buy-to-let mortgage enquiry form. Once we have received your details, you will get a phone call from one of our expert advisors.

Sources of help and information on buying to let

It can be useful to talk to people who have direct experience of the buy-to-let market in your area and in general. There are several places you can go to get pointers and advice on building your property portfolio.

Your estate or letting agent can help verify research you have done, or set you on the right track for your own legwork. Remember, though, that their agenda is to sell to you – so always fact-check what they tell you.

Property networking groups are a useful place to meet like-minded property investors who know the local buy-to-let market. There are also a variety of landlord and investor communities online.

You can also consider joining local and/or regional landlord associations. For a fee, associations offer ongoing help and resources for members. They host seminars, offer networking opportunities, and keep members abreast of important market developments.

And at Commercial Trust, we offer a range of free resources to help you along the way.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.