How to manage your buy-to-let property portfolio

If your buy-to-let business has been going pretty well so far, it can be tempting to assume that the best way forward for your business is to buy more, and more, and more property.

But as many high street businesses have recently learned at their cost, growing too quickly during boom periods can leave you saddled with large debts and struggling in leaner times.

So, our quick guide outlines a beginner’s guide to managing your property portfolio prudently.

Read the market

Keep an eye on local asking prices and rental rates using information freely available via the popular property websites. Zoopla maintains its own tracker where you can track property price trends by town, postcode area or even street.

This means you can’t necessarily use it to monitor an individual neighbourhood’s change in value (if a postcode area covers half the town, for instance), but comparing similar properties and tracking them yourself will give you a broad indication of trends. Keep a spreadsheet to monitor the change over 12 months, for instance, and map them out if possible. It could be that some pockets or even particular streets outperform others.

Of course, a trustworthy estate agent can keep you abreast of what’s happening with the local market, but remember they have a vested interest in selling property. A less scrupulous agent may lead you to believe the local market is more buoyant than it truly is.

Monitor local planning

Improvements to nearby transport links or other infrastructure projects can hint at potential future hotspots. Previously cut-off parts of town could suddenly become more attractive to younger professionals and similar renters who make do without a car. This in turn can lead to an increase in average rents and sale prices.

Be wary of buying based on conjecture, though – rumoured projects may not go ahead. So, too, those that’ve been announced, if there’s a change to local government and/or their budgets.

Look for bargains

Sometimes an opportunity will present itself that’s too good to miss, so it pays to have cash reserves available for a deposit at short notice. You may want to:

  • Buy off-plan – some significant discounts can be secured if you agree to purchase a property before it’s completed or before ground has even broken on its construction.

  • Look skywards – properties above the sixth storey of a high-rise can be harder to mortgage with some mainstream lenders, meaning they may command a lower price when it comes to sale (but a higher rental price, if they offer particularly good views).

  • Consider a renovation project – if you have time and money to invest, look at bringing an old or perhaps abandoned property back into use. Be aware, some mortgage providers will refuse to mortgage an ‘uninhabitable’ property (i.e. one where the kitchen or bathroom have been completely ripped out); whereas, here at Together, we’re usually happy to lend on such a property

  • Conversions and divisions – commercial units (especially offices and retail units) that have sat empty for long periods represent dead money for their owners, so you could get a great deal. Remember you’ll have to apply for a change of use and probably spend heavily on conversion works, so speak to a builder and the local authority before signing on the dotted line.

When to buy

If you identify a part of town where rental prices are climbing rapidly, this could indicate a hotspot and it may be a good time to invest if it has all the right ingredients (like good transport links, top-rated schools and green space).

Rising rental prices typically go hand-in-hand with capital gains, so it’s likely that sale prices are increasing at the same time. As with anything increasing in price, the sooner you move, the better deal you’ll get.

Beware of bubbles, though – as the saying goes, what goes up must come down.

When to sell

If rental demand in your particular area weakens and house prices are stagnant (or, worse, falling), it could well be time to sell. This mitigates the chance of the property sitting empty for a significant period (leading to losses), and maximises any capital gains you have made during your ownership.

You may also decide to sell some of your portfolio if you have too many similar properties, or too many concentrated within a single neighbourhood. Reinvesting the proceeds in a diversified portfolio can protect you against market pressures, such as a particular part of town becoming suddenly unfashionable or undesirable.