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  • Property-a-holics

    Next steps to expand my portfolio

    Dear all,

    Do you think it is feasible, or do you have any suggestions how I can build my portfolio.

    - I have very little cash, maybe at a stretch, only 5k,

    - I have one mortgaged residential place, which I rent out (I am currently staying with family so don't live in my residential place). Net this brings in 450 a month and the mortgage is interest only.

    - I have 2 properties (in a limited company) which is fully owned and with no debt. But these 2 properties have no income, and will have no income for the foreseeable future - both with lifetime tenants in their 60's.

    I would like to expand the portfolio but not sure what to do next,

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    Hi Kent and welcome to the tribe.

    In these challenging and unpredictable market conditions, I regard it as vital to have a cash buffer and £5K would be the minimum.

    Therefore, if you spend this money, you are operating at the very edge of potential risk.  If I were in your shoes, I would hang on to these funds.

    You mentioned your residential property.  Do you ever intend to live there again?  If not, and there is sufficient equity in it, you could remortgage it to a BTL mortgage, pay back your outstanding resi mortgage, and anything left over would be a fund to use for expansion.

    From what you have indicated, this is the only way I could see forwards for you.

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    Thanks for the welcome and reply,

    There is no intention to live in that resi property. The outstand balance to market value is about 30%.

    I considered remortgaging it for more funds, but I am not sure it is worthwhile as a BTL mortgage is much higher interest rate than I have today.

    Are you suggesting that there is little I can do with the 2 properties with life tenants?

    By the way, does anyone know of a stress test calculator? I was told I need 145%, and current rental is 600. So how much does that mean I can borrow on those requirements


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    It might be good to speak to a specialist mortgage broker such as the team at Property Tribes Financial Services on 01206 654444.  I say this because BTL mortgage rates are extremely low at the moment and very competitive and I would be surprised if you could not find a really cracking rate to allow you to release equity.

    A rent of £600 pcm will support a borrowing of circa £90, 300.

    The life tenant properties - I don't see what you can do with them tbh.  You can't take out finance on them.  So the only option would be to sell them and use the money for a property you can finance.

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    If you want to exspand you need to save more cash

    BTL needs good cash reserves to move forward

    without the cash you will struggle

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    £5k is not a lot to get started with.

    If you want to expand your portfolio you should aim at increasing this saving, or increasing the rate at which you can save.
    Such as decreasing expenditure where possible, maybe that is canceling that Sky+ and Gym Membership to snip at the edges.
    It may be that your Car Lease/Loan is a big strain on your income and downgrading your current "standard of living" will give the future self a better "standard of living".
    Having £5k in savings is great but not when you have £5k in credit card debt at a high interest rate.

    You could for example, use the £5k to pay down your current mortgaged property. So that the Net £450 is increased giving you a greater rate of savings.
    An alternative is to make the £5k work by increasing the value of that current mortgaged property, perhaps an extension or loft-conversion will increase the value of the property and increase the rent that may be achievable.

    Those disappointing answers looking at the "long term" may not be what you desired. The alternative is bank-of-parents or jv partners, looking if they are willing to invest their savings into purchasing property.
    Given your existing portfolio you can get mortgages up to 85% of the value of a property, though ideally you would want to have savings of at least 20-25% of the property value before purchasing, giving better interest rates.
    The last thing, I can think to mention is you may have £5k in savings but is there equity in your current BTL's, perhaps remortgaging at a higher loan-to-value will free up cash to purchase additional properties. (See: Leveraging )

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    _________________________________________________________________________


    My posts are not financial advice but often me rambling - passing time on a coffee break.
    Our team at Bespoke Finance offers Limited Company Buy-to-Let and Cheap Life Insurance.

    _________________________________________________________________________


    Life time tenant, remember the case in France where a man purchased a property with a life time tenant in hoping to reap rewards after she died.  Well she went on to be over 100yrs old and out lived the man. They could well live for another 30/40 yrs. 

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    Absolutely,

    I might pass before either of these investments mature. So I'm carefully considering before investing into such again.

    I'm in my late 30's and without a pension plan. So if I out survive my tenants, it will help fund a possible retirement.

    If not, this is what I am leaving for my children. I don't have anything for them, and fear of passing before seeing them grow up. If that happens, hopefully this can fund their education and help realize some of their dreams

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    So potentially I can remortgage my place. I am left with a big dilemma now.

    If I remortgage, the new interest rate will be double the interest rate I am on today. It seems pretty silly to remortgage to a worse rate - but if I do not, I will not have the funds to invest in another place. My thinking is that if my yield is higher than my mortgage interest rate it is worthwhile - but I am not sure if that logic is sound.

    So back the the original question on how to expand my portfolio, if I had 50k but no more positive cashflow, any recommendations on what I should do ?

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    How about bridging against the equity in your home, buying a property for cash, refurbing it, then taking out a BTL mortgage to redeem the bridge?

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    I would love to do that, but I am time poor.

    I spend very little time in UK because of my work.

    Certainly hope to build up more income streams so I can be in UK more, then can pursue such options

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