Property investors often say to me “Deep, how can I make my existing property portfolio more profitable?”
It’s a tricky one and there is no ‘one size fits all’ answer. Let’s look at a few options:
- Increase your rents – a good strategy but not always possible especially when the market is very competitive (in fact you may have to lower your rents in some cases to get your properties rented quickly)
- Try to find new more profitable uses for your property – a classic example would be taking a large 6 bedroom detached house and turning it into 3 self contained flats. This strategy can only be applied in certain situations
of course.
- Assuming the property is financed with a loan an investor could renegotiate financing terms or refinance with a different mortgage lender. There are some great rates out there at the moment so this is a viable
option that I will focus on in this article.
Let’s look at an example of how a property investor might go about making her property portfolio much more profitable by taking the refinance route…
She is paying £600 per month a mortgage interest on a property which earns her £800 per month in rent. That’s £200 per month (gross) that she gets to keep each month. She has an average level of equity in the property.
If she could refinance the debt and reduce her mortgage interest payment from £600 to £500 per month then let’s look at the figures now.
Her gross profit each month has leapt from £200 to £300 – that’s an increase of 50%. Keeping everything else equal, let’s assume she has 20 of these properties. That would mean her gross income shooting up from £4,000 per month to £6,000 per month!
That’s a £2,000 increase in her monthly income for nothing more than speaking to an honest independent mortgage broker and filling out some forms. Let’s look at another example. A property investor owns £1m of property with loans of £500,000 secured against the portfolio. The total rental income is £80,000 per |
year. Mortgage interest payments are £35,000 per year.
By simply refinancing the £1m property portfolio up to 80% of current market value he ends up with £300,000 in cash (£800,000 - £500,000) that he can use to purchase more properties. His interest payments rise to £56,000 which are covered by the £80,000 in rental income coming in.
Overly simplistic examples perhaps but I’m sure you get the idea.
This approach doesn’t just work for BTL investors either. It can be applied to whole raft of property investments including renovation projects, redevelopments, land acquisitions, conversions, buy to sell properties, commercial property investments and even second home investments.
Get A Trained Professional
To Help You
Hitting the web and choosing a mortgage product from one of the many of lenders out there can be headache. For a start you will not be able to access many of the ‘special’ products that lenders reserve for brokers. Why? Because they have buying power that you as an individual will not benefit from.
You will also waste valuable time chasing people you do not have much influence with. For example, I’ve just raised £980k from Lloyds TSB for a development project I’m working on. My broker called the
bank every other day to answer their
questions and chase the application. Then more questions and more chasing followed by bankers taking holidays followed by a few more questions and so on…
After all that you’d expect them to have an offer for me within a few weeks wouldn’t you? The mortgage offer took the bank THREE MONTHS to get out to me! And in that time my mortgage broker had invested many hours either on the phone, sorting out forms himself or discussing things with me.
He is not paid a penny unless the mortgage goes through so why would I want to waste my time chasing everything when he can do it all for me?
What Should You Watch Out For?
Be VERY wary of mortgage products |
with the very lowest rates. Some deals appear very attractive until you read the fine print where you will not only find hefty arrangement fees (sometimes added to the loan but repayable by you eventually remember) you may also be forced to pay substantial redemption penalties if you repay the loan early. This is fine if you want to be tied in for a while but make sure you are aware of the flexibility you have given up.
An independent properly qualified mortgage broker can you lead to the best deal.
How Do I Find A
Good Mortgage Broker?
We have several quality mortgage brokers on our Tycoons forum website or if you prefer you can drop me a line via broker@property-finance.com or call our office on 0121 702 1414 and I’ll give you the number for the team of mortgage brokers who handle all my business.
They will call you back and talk you
through the hottest deals on the market. More importantly they will take all the hassle and trouble out of finding the best buy to let mortgage product for you.
Getting The Very Best Deal
It’s important that you secure the very best terms on offer. My team will show you how to structure your application in order to do this. They will search the market for the most appropriate deals that will allow you to reduce your monthly repayments and/or raise extra cash you can use to buy more properties or do whatever else you want to do with it.
They can help fund HMO properties
(licensed or unlicensed), ex council properties, commercial properties, flats above shops, studio flats, bedsits and part commercial part residential properties. Tenant types include students, DSS, companies, housing associations and councils.
No matter where you are in the property business – established or just starting out drop them a line and see what your options are. Drop me a line via broker@property-finance.com or call our office on 0121 702 1414 and I’ll give you the number for the team of mortgage brokers who handle all my business. |
Hi my name is Leslie Parr. We have three grown-up children two lads & a girl and two beautiful grandchildren. We have recently celebrated our 25th Wedding anniversary. We went to Deep’s Spanish retreat for the celebrations.
Like many of you, I have Deep to thank for opening my eyes to the world of BMV property some time ago and it's great to be part of this community of like-minded investors! I have a Finance/Marketing background, I have developed a special interest in Creative Finance/Legal methods to purchase property and I'm actively using these strategies to build my portfolio.
Hi everyone, we are Juswant and Sylvia Rai aka Mr. and Mrs. Rai. We'll keep it short, but once Sylvia gets going...! Our background is 20 years working in IT (Juswant) and 15 years in Finance (Sylvia). When we met three years ago we realized very quickly that we had a common interest - Property!
In A nutshell: 
Pankaj passionately believes that property is one of the few investment vehicles that make people genuinely rich over time. Since BMV route allows the transfer of real Wealth in the direction of an investor, Pankaj decided to put his consulting career on hold to build his property portfolio. He is excited to be working with so many multi-talented individuals on this forum, as well as with Paramdeep and the rest of his Tycoon team behind the scenes.
Parmdeep has been described by some as the UK’s ‘bargain property wizard’ after having introduced over 60,000 UK property investors to proven techniques they can use to find distressed sellers of cheap properties and how to buy these below market value bargain properties using little or none of their own money.
