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  • Property-a-holics

    Looking for advice on growing portfolio

    I'm considering purchasing my third BTL property but I'm after a bit of advice on overall strategy. 

    I currently own two buy to let properties, both on fixed-rate mortgages with 3 and 5 years left before the fixed deals run out. Both mortgages are repayment. They are both pretty decent yields and I have a cash flow of about £180 pcm, per property + the equity being paid down. So far (fingers crossed) they have been relatively hassle free and I'm happy to carry on in BTL.

    Strategy wise it has been about as basic as you can be, buy a property with a 25% deposit, small amount of renovation, rent it out via an agent. Then start work saving up the next deposit and so on. The modest goal being, by the time I'm 50'ish I want at least 4 properties fully paid off and I can retire comfortably from the rent. Then, when I die and leave £350-400k worth of houses (today's prices) to my future kids.

    What I'm thinking though is it's a very slow an inefficient way of doing things if I'm looking expand the number of properties I own. If for example I went interest only on my next purchase and switched the other two properties to interest only when their respective mortgage deals end I'd be getting roughly an extra £450 pcm in the bank. which would speed up the rate at which I save money for the next deposit.

    Another option is I could maybe realise some equity from one of my existing houses. As it's worth £85-90k and only has £35k owing on it now, meaning I could take £25k out and still have an acceptable LTV ratio on it. Unfortunately, that is the one with 5 years left on its mortgage deal (recently done on a much lower rate than I used to be paying) so that would have to wait a while. 

    So, assuming that is off the cards for the short term I guess it comes down to repayment Vs interest only. I've always liked the idea of owning property outright eventually as I'd like to have significant assets when I'm old so I've options to pass that on to the kids but the more I think about it, the more it seems like money tied up in houses is money which isn't working. Why have 4 houses 100% paid off when you can have 10+, 25%+ paid off, bringing in far more rent overall, even after the interest payments. And when it comes time to pass them on, £400k is £400k whether it is spread over 4 houses or 10. 

    So I guess what I'm asking is, is there any real advantage to having BTL properties on repayment mortgages assuming the rent covers it and you're not massively over gearing with he bare minimum of equity in each house? Any other general advice would also be appreciated.

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    There is a thread on the topic you are interested in here:

    Full repayment or Interest Only Mortgage ?

    This thread is also a useful resource:

    Growing a property portfolio - resources 

    ​I am just heading off to an event in London, but will try and reply more fully later today. Smile

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