How to increase size of BTL portfolio

How to increase size of BTL portfolio

11:15 AM, 16th November 2014, About 10 years ago 6

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Hi Everyone,

I have a portfolio of 3 flats in South East London, 2 are mortgaged at 75% of their current value and let out for a good rental income and one is under renovation at present. I’m also in the process of buying a fourth flat in the same area which also needs to be refurbished. How to increase size of BTL portfolio

All flats have been bought in poor condition over the last year and a half and renovated by myself to a good standard, then remortgaged to 75% of their increased value.

My problem is that once I’ve paid the 25% deposit and renovated the fourth flat I will have run out of working capital to continue buying further properties.

Option 1 is to sell the 3rd flat I’m currently working on for £310,000 (what I believe it’ll be worth) I can bank around £115K and the profit will be around £35K after all costs as purchase price was £250K – this leaves enough money to buy two further projects

Option 2 is to let it out and remortgage it in 4 months time at 75% and bank around £45K – which is not really enough to buy another flat in my area

Option 3 is to let it out and remortgage it in 4 months to 80% and bank around £60K – which is just about enough to buy another project.

The other problem I have is the 6 month wait the mortgage companies impose to refinance a property to remove the equity, which really slows things down.

I have given up my previous job to renovate property and be a landlord full time now and am only interested in buying flats I can work on myself, so they need to be close to where I live as I have children to take to school and pick up each day.

What I’m curious to know is how other investors increase the size of their portfolios without selling and if anyone can come up with a solution for me to continue without having to sell any of my flats on the way, is this possible? Oh and there’s no chance I can pull out any equity from my own house as my wife would hear non of it.

Any suggestions would be hugely appreciated,

Many thanks,


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Mark Alexander - Founder of Property118

11:30 AM, 16th November 2014, About 10 years ago

Hi Angus

Presumably you raised the deposits for your first few properties by saving your surplus income from you day job and investing it into property when you had accumulated enough money? If that is the case, it seems you may have killed the goose that laid the golden eggs by quitting. If that's not the case, how did you raise the cash to buy your first investment property?

Nevertheless, you are where you are. Your options, as I see them are:)

1) Compare how much money you can make by getting a new day job vs property trading and make a choice
2) Wait for your property values and rents to rise to a level where it it safe to remortgage to release funds to buyt more
3) Stick where you are and live of the cashflow from your portfolio, manage the costs down as much as possible to optimise your cashflow and increase rent in line with market conditions to hopefully keep your cashflow in line with inflation.
4) Consider whether selling all of your properties on a staggered basis will provide sufficient capital for you to live the rest of your life comfortably.

From what you've said, you may well have already made an unconscious choice, i.e. to trade your properties to derive an income and reinvest surpluses to build a portfolio until such time as 3) or 4) above is a realistic option.

If you need some one to one advice please see >>>

Good luck.

Angus Moore

12:30 PM, 16th November 2014, About 10 years ago

Reply to the comment left by "Mark Alexander" at "16/11/2014 - 11:30":

Hi Mark,

Many thanks for your suggestions, and to answer your questions:

The money for the first project was raised from the sale of a BTL flat which I'd owned for 10 years and had a good amount of equity in. I used some of this money to live on and some to buy the first flat (a repossession) in April 2013

This flat did so well after renovation and the market working in my favour that I remortgaged it and had enough to buy the second property for cash (I was turned down for a mortgage due to the poor condition)
The second flat did extremely well too and when I was able to mortgage it I had enough for 2 further flats.

With regard to my previous career as a self employed photographer, it only really provided enough money to live on and there wasn't a surplus for investment - also the hours were unpredictable and with 2 young children I decided it was time for a career change. My wife is also joint owner of all the properties and she has a good salary which enables us to secure the BTL mortgages.

I can continue at present by selling flats and releasing the equity in them as you mention but as I work so hard on the refurbs I become attached to the properties and find myself reluctant to sell them - my wife tells me I need to get over this 🙂

Many thanks again,


Mark Alexander - Founder of Property118

12:41 PM, 16th November 2014, About 10 years ago

Reply to the comment left by "Angus Moore" at "16/11/2014 - 12:30":

Hi Angus

Listen to your wife, she's right, as they often are. I've learned that two words make for a successful marriage "yes dear".

Think twice about selling property #3 as soon as the refub is finished though. If you do that it will never have been an investment property in the eyes of HMRC and you will be taxes on profits as trading income. That means that you will not be able to use the annual CGT allowances for yourself and your wife to reduce the tax payable. Also, CGT is often cheaper than income tax from trading.

Take advice from a good accountant who should also consider proportioning the ownership of the properties prior to selling. I don't know how much your wife earns but if her share of capital gains exceeds the higher rate tax threshold then you could end up paying 28% tax on some if not all of her share of the capital gains. A good accountant will help you to optimise your tax position - here's a link to the member profile of the guy I use >>>

From a tax perspective you may be better off selling property #1 or property#2 because they have been let and will qualify as investments when sold, hence making your annual CGT exemption allowances usable. Alternatively, you could let property #3 for 6 months and then sell it.

james pearce

13:22 PM, 17th November 2014, About 10 years ago

seems like a potential gotya here I was unaware of!!!!
When does a trading property become an investment property??
I did similar with one last year, we bought, renovated, and rented out for 9 months before selling. We owned the property for a week under a year........
sorry to piggyback on the thread.......

Mark Alexander - Founder of Property118

13:25 PM, 17th November 2014, About 10 years ago

Reply to the comment left by "james pearce" at "17/11/2014 - 13:22":

Rule of thumb is that once a full tenancy period has been completed (i.e. minimum 6 months) it would be an investment property.

james pearce

13:34 PM, 17th November 2014, About 10 years ago

Thanks Mark,
Good to know that.
Always rent a property at least once 🙂

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