Fairly New Landlord - Should I expand portfolio?

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    Fairly New Landlord - Should I expand portfolio?

    Hi,

    Any advice welcome. What would you do? Here is my current situation.

    I am earning 35000 a year in my job. Live in the Northwest of England.

    I currently have 1 property paid off worth 60,000. I get rent on this property at £360p/m

    I have a second property worth 64,000. The mortgage on this property is currently £202P/M and my rent is £380 Per month. I owe 42000 on this property.

    I am currently paying £720 P/M on my current personal mortgage (where i live).

    I am considering releasing 45,000 equity from the property which has been paid off. Pay £20,000 off on my personal mortgage. Buy another B2L property with the remaining 20K as a deposit.

    Is this too risky? Is it a good idea to remortgage and spread the risk and increase my portfolio? I am married with three kids and would like to be able to pay for university fees in the future and have a decent income. I also don't want to work for until I'm 65!! What would you do in my situation? Would you expand the portfolio? If so, how would you do it?

    ANy advice welcome!!
    Daddy Landlord

    #2
    I'd personally expand the portfolio at this time, being a buyers market. Following very much your plan but I'd personally not pay monies off a large sum of your personal mortgage and perhaps purchase another BTL Property.

    It is another form of income and presumably your Personal Mortgage is on good rates and you may be hit by Early Repayment Charges.

    You should of course not take advice of a guy on the internet and discuss the matter with a Whole of the Market Buy to Let Mortgage Broker.

    Comment


      #3
      Thanks for your input, I have actually been speaking to a financial advisor/mortgage broker who has advised me on this. He has suggested I buy another 1 or two properties? I just wanted thoughts of other landlords.

      My only concern with the expansion of portfolio is the maintenance costs associated with this. This will eat away at my personal income.

      What have your experiences been with general maintenance costs? Am I mad to expand? Or mad not to...
      Daddy Landlord

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        #4
        More Properties means More Maintenance but it may also result in more income. You should have some emergency money for a new boiler or other large expenses, no doubt.

        I don't think anyone here would say you are mad to expand, they may say you are mad if you do not have a good financial standing.

        Comment


          #5
          Any financial advisor will advise taking on more properties if they think they can see fees for new mortgages or other financial instruments...

          If it makes sense then go ahead, but don;t believe anyone who's income depends on commission from products he flogs you...

          Yes, you are right, I am cynical....
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            Originally posted by YesAdam View Post
            More Properties means More Maintenance but it may also result in more income. You should have some emergency money for a new boiler or other large expenses, no doubt.

            I don't think anyone here would say you are mad to expand, they may say you are mad if you do not have a good financial standing.
            Define good financial standing. I keep £5000 a side for any surprise costs. Is this good enough for three to four b2l properties. Is this good financial standing?
            Daddy Landlord

            Comment


              #7
              By the way... i Forgot to mentions that all my mortgages are repayment, So profit from rent (in comparison to monthly mortgage payment) is minimal...

              Come on peeps - what would you do...
              Daddy Landlord

              Comment


                #8
                I would definitely get at least one more btl - try to avoid leasehold. Also, I would have the btl on interest only - it's easier for calculating tax. You can always do a capital repayment with any profits at later date when you feel comfortable with your bank balance.

                If you are going to have three or four btl's - I don't think 5K is enough for any surprise costs. £8 - 10k would be better. I have three btl's and recently, I had two tenancies coming to an end together and one involved court fees and about £1500 of repairs whilst getting property ready for next tenant.

                Maybe get one more btl for now, put the other money in the building society and then give it a few months and see how you feel then for getting another property.

                Comment


                  #9
                  You already own and rent out properties in your area and are therefore best placed to judge the value of that particular market. However in the main, if you can get borrowing at a decent rate (and interest only will be even more difficult to obtain), then go for it!

                  Just make sure the maths work out and plan for rates to rise at some point in the future....

                  Comment


                    #10
                    Thank you very much everyone. Your thoughts and advice has been really useful. What's more and more apparent after sitting down and doing the Maths (I am also working on an average of 6% interest rates to account for rises) is that although equity is easily accessible, I need to seriously consider my cash-flow to sustain the portfolio in the long term. At the moment, my salary is enough to cover mortgage costs should anything happen to rental income, but if i expand then i am no longer in control and need to make sure I have a good cash flow. Ive never purchased on an interest only before but maybe now is the time.....

                    Keep your thoughts coming!

                    Thanks again everyone....
                    Daddy Landlord

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