Buy to Let and Portfolio Issues

Very often when there are healthy markets, investors can only see upward growth. However, if these rises don’t happen then investors get left with what are known as ‘involved’ portfolios of buy to let/investment properties.

Typically, these portfolios have a number of properties with relatively low prices and similarly low rents. They may yield a return but when you take out costs and mortgage payment, it does not leave much of a “buffer”.

Often the investor sees such portfolios as a distraction. The initial model is to ultimately cash out when prices rise. If you own 20 properties with an average purchase price of £75,000 and £60,000 mortgages each; the model is to leverage the £15,000 investment each to ‘ride the rising market’. When the expected 20% rise doesn’t occur then they become ‘unloved’. Invariably things go wrong and very often the portfolio starts to absorb rather than generate cash.

The important approach to any portfolio that is struggling is to separate the properties with each lender and deal with them accordingly. Then it is a case of maximising the return on a lender basis.

This is a simplistic example but gives an indication of how we at Bell and Company review and advise in such cases. Our intellectual property in this specialised area of work enables us to first:

1. Minimise any landlord’s personal exposure, and
2. Understand how the differing lenders work.

From there we devise the strategy but most importantly implement the strategy.