Three rules to becoming a property millionaire
Buy to let has been one of the most viable investment options in the UK for the past 21 years. Since the introduction of buy to let mortgages in 1996, property investment has become much more accessible to the average person and life as a hands-off landlord has resulted in many investors making sizable profits without compromising their precious time.
Understandably, many people invest in property for the returns that can be made and while many landlords are happy with just one or two properties to provide a healthy second income, those who are looking to build a portfolio can look to gain some serious profit, when carried out wisely.
If you’re wanting to create a strong property portfolio for maximum returns, consider the below points to help you start your journey:
• Be prepared for long term gain
With property, there are no “get rich quick” fixes. Any investors who have made millions from property will not have gained this overnight. Buy to let is profitable and can generate an income from day one, but landlords will need to be patient with their investment to grow a successful empire.
For those at the very beginning of their buy to let journey, portfolio growth will need to happen steadily if you’re not in a position to purchase multiple properties at once. Should you start off with one property, you could save the returns and use that to then fund a second property and continue the process as and when possible. If you have slightly more cash to invest, you could leverage this using buy to let mortgages and invest in multiple properties for a higher return on cash invested. As years go by, house prices will increase and that’s where you can visibly see how much your investments have gained. By looking at a conservative rise of 4% year-on-year, a property you bought for £100,000 this year could be worth £131,593 by year 7 - an impressive gain over a relatively short period. Bear in mind over that time you’ll also be benefitting from the capital growth of not just one property, but several. This is in addition to the rental income you would have collected during this time - this is where your overall return on investment can reach millions.
• Tax and mortgage efficiency makes a difference
Being as vigilant as possible with your finances can really pay off. 2016 saw some new tax changes introduced, but for investors who have invested smartly, there won’t be any substantial changes in the long term.
As we mentioned above, mortgages have played a huge part in successful investments over the last 21 years. They have allowed landlords to put down minimum deposits on certain properties and use leveraging in order to boost their portfolio and spread their cash across several properties to gain bigger returns (see more on the benefits of leveraging here). For those seeking further financial advice, including questions about tax, Sequre can recommend mortgage brokers and tax advisors to guide you through the process and explain how it can help your property journey.
• It’s all about location
It is often said how vital location is within buy to let and this is just as true today as it has been for many years. It cannot be stressed enough how much of a difference this can make to the profit you look to make within your portfolio. The likes of Manchester, Liverpool, Birmingham and Leeds have consistently topped the list for buy to let hotspots across several major publications thanks to the high yields and house price growth found in these cities.
A common mistake often made when investing in buy to let property is investors believing that the city with the highest house price rises automatically equals the best investment. When it comes to London and other areas of the south, this could not be less true. Property investment is a careful balance of tenant demand, rental yields and capital growth. Up and coming urban cities in the north offer this at an affordable price to investors. The same cannot be said for the south as prices have hit such heights that they have become unattainable for the average investor which causes yields to plummet and tenants to look for cheaper alternatives – remember this when you’re looking for the most profitable properties to add to your portfolio.
If you want to learn more about building a property portfolio, contact Sequre today. We specialise in sourcing properties from banks, receivers, builders and developers and negotiate genuine discounts so you benefit from instant equity. Our deals are exclusive and you won’t find them anywhere else. We can help and advise on how best to start your buy to let journey and help