You are a property investor or a landlord looking to expand your portfolio and you are not sure how to do it? I will share my personal journey and give you some other ideas as well.
My journey has started a couple of years ago and led me to invest in Scotland. You can find more about my choice in this POST but for the moment, the main reason being accessible property prices which come with good yields.
My goal has been cashflow, so I buy to let (or rent, depending on your English background).
Having this in mind, I can now tell more about expanding your property portfolio.
Expand your property investment portfolio
As I’ve introduced before, I invest in Scotland and Brexit has been and still is in people’s minds and to some extent has slowed the market across the UK but my tips are applicable independent of such events. They are not ways of taking advantage of specific market situations, they are procedures you can implement when you want expand.
So what are the ways to expand your property investment portfolio?
A pot of cash
OK, this is obvious you say.
You’re right, it’s obvious and that is partly how I started my property portfolio. I had some money aside that I used first to invest in kowlwdge and then to invest in property.
Most people start that way, they take away savings from the bank to put a down-payment and get a mortgage and buy a house they can rent and get (if you do some homework and get a good deal) higher returns than the bank gives you.
What if your savings are not enough?
Other people’s money
This is actually what many gurus sell you. Go out and find other people that will invest for you.
I must admit that it’s as easy as it might sound and you need to approach people that have an investors mind with good deals.
At this stage, this was not my approach.
I actually did what a lot of other people do to buy their first home… Asking to the Parents Bank of Kindness for some help. In my case was for business and not a personal home.
Such help may or may not be enough to get you a property but it might be difficult to get a portfolio that way.
So what else can you do?
At this stage things might start to get more complicated.
Equity release in our context simply means releasing cash which is blocked in a property. Meaning you already own a property and either you sell it or put a mortgage (or remortgage) against that property. This way you create a pot of cash that you can use for expanding your property investment portfolio.
I have actually used both these techniques of equity release. Let’s take a closer look at them.
Equity release – Selling a property
Why would you want to sell a property if the goal is to expand your portfolio?
There could be many reasons, from getting rid of a poorly performing property in terms of cashflow to enable a way of increasing overall cashflow.
The latest was my reason. I had a property in a location that had increased a lot in value but rent was not as good, so I decided to sell and with that cash buy a couple of properties that overall increased my cashflow.
The fact that I am an overseas investor means that I faced some restrictions (here you can read more about them and how to minimize them) and to try to minimize them I purchased one property in cash and another, cheaper, with a mortgage (which came with high interest rates).
So now I was the proud owner of two properties in Scotland.
As I am a property investor I wanted to expand my portfolio so what could I do?
Equity release – getting a mortgage
There is this rule among lenders called the 6 month rule. It means that once you buy a property it needs to stay in your name (or your company name) for at least 6 months before you can resell it or refinance it. So before I could do anything I had to wait for 6 months.
Another important factor is that some lenders require 2 years UK landlord experience. If you starting, you might just have to wait.
Fortunately my lender didn’t require such long experience and I could go ahead with setting a mortgage against the property I had bought with cash before.
Why didn’t I just bought that property with a mortgage in the first place?
It’s a logical question and the answer is simple. Because by waiting I would have access to better interest rates. By waiting I would have UK landlord experience, I had built some credit rating and the lender already knew me. All these reasons helped getting better rates for a new mortgage.
In all fairness, not all lenders are created equal and some take a little more risk with non-typical investors and non-typical investments. So you need to shop around to find the one that suits you best.
What did I do with this equity release?
I expanded my property investment portfolio
I ended up with a deal involving 3 mortgages and 2 new properties which enabled me to increase my overall cashflow.
Not for the faint of heart perhaps but all as gone well.
The next step for expansion will require something else and I have not yet decided how to proceed.
Keep looking at my blog and once I expand, I will tell you how I did it.
I’m always looking to learn so send me your comments, questions and suggestions. I’m excited to read them.
Wish you a great day
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