UK Landlord Forum / Life

Hi i am wondering what peoples opinions are on the best way to build up your property portfolio when only on 25k salary.
I am 34 and for the past 11 years been buying and renovating properties as well as working my day job on 25k salary. Up until now i have renovated 5 properties making a reasonable return on them all by selling apart from my 2nd which i still rent out.
I have just recently released some equity from my residential property and brought a 2nd buy to let. I would like to continue to build my portfolio but know with my low income it would be hard and take ages to save up a deposit for a 3rd. Just wondering what peoples opinions are on the best way to go forward and if anyone else out there has managed to get very far on a low salary?

Thanks.

Why release equity from your residential property, i.e. your home? That's the most tax-efficient thing you can put money into. You earn very little but are playing in a big game. Seems strange. Always sort your own home out first, then play around. My advice? Get a job that pays more to give you more freedom. £25,000 is surely even before the national average?

Cheers for the reply Hippo. I know it was not the ideal way of doing things but it was the only way i could get the deposit together to purchase a 2nd. It only put my residential mortgage up by £60 a month and the return i'm getting on the rent more than made up for that. The plan for me now is to use the income to pay of my residential mortgage to bring the loan down.
I know i could go and look for a better paid job but then comes the more hours and responsibility whereas my current job gives me the time and freedom to renovate in my spare time. I know that if i get a bigger job i will probably be then working evenings/weekends etc.
My long term aim is to be able to cut back on hours to concentrate on other things.
If i waited to pay of my residential first you would be talking prob 20 years plus and then the chances of getting mortgages at 55 would b slim plus house prices would b ridiculous. I dont want to be stuck in the rutt of paying of a mortgage for the rest of my working life and this was the quickest way i could ti k to get there.
I'm a plumber by trade so am able to do all repairs myself and manage the properties myself aswell which helps with costs.

You must be making good money out of the renovation / refurbishments? I've done one refurbishment - bought for £56,000, spent (seriously) about £20,000! on it, but should easily rent for £500 to £525 - and that's not a bad return on the total investment in my neck of the woods - general rule of thumb would be £500 rent for £100,000 property around here (there's always exceptions to the rule). If you are selling-on then and you've created good products, plus bought well, you must have a healthy war-chest?

For paying-off of your home - you don't wait 20 years. What you do is get yourself an offset mortgage or at least one where you can overpay more than a limited 10% and you blast away at it. I completed my first mortgage (started when I was 23) in 11 years... then I started to play with property. At the moment it's working-out well for me, and I enjoy it, but I wouldn't re-mortgage my own home to provide the ability to get into the game... I would save much harder instead.

Apologies if that sounds old skool... but I am. Any mortgage I take on is also repayment (going against the grain somewhat), so I will own these let properties in due course and, eventually, they will be unencumbered... at that point it should be plain-sailing.

I currently overpay on a repayment mortgage for a property I have let out (on CTL) in the following fashion:

Paying mortgage of £800.
Rental income of £1,200.
Minimum payment of £490.

That mortgage will be finished in 13 years. The numbers, for me, need to be where rent is >=£200 more than outgoing repayment mortgage. I'd not be doing it if it wasn't. I like to go for long fixed terms (I don't care about ERCs and things like that)... 5 years is nice.

Now is the time for you to work hard and rake the money in for your services... build up the funds and then clear the path for yourself in the future. It is fine to be lazy when we're a little older... I know, I'm there (BTW, I know you said you're using your spare time to renovate).

The BTL game is all about having significant funds to begin with. I seriously don't think this it's something I'd recommend anyone gets into on a shoe-string (if that's not offensive, it's not meant to be).

Thanks for your advice I really do appreciate it and I will be taking it on board. I think I have done well with the reno's mainly because I do all the work, apart from plastering and certified electrics, myself. In all five I've sold on I have added about 40 - 50k equity onto the property. I know the rising house prices have contributed to this as well. As for the rental the one I got first of all I brought for 128k 8 years ago and is now valued at 180k, and I rent out for £625, which in all honesty is about £75 below market value. I have good tenants so I don't mind taking a little hit to keep them. For that I pay an interest only mortgage of £160. My 2nd I have brought for 165k paying £360 interest only with rent coming in at £800. I totally agree with you about the repayment mortgage and it doesn't sit well with me going down the interest only route but for now I was thinking get as good a return as possible and then place it into my residential one. I shall definitely consider going over to repayment though.

It's not typical of BTL Landlords, to be fair.

Most consider it a long game, but are banking on capital appreciation only. I'm considering it a long game but I am focusing on the long-term (infinite?) rental income stream. Capital appreciation is nice, but interesting (for me). If rent > repayment then I cannot lose (or can I?). Additionally, the Government's new approach to taxation means that I am more interested in paying debt down - you don't strictly do that (although you can) with an interest-only mortgage - so you need to be cognisant of your tax position relating to interest on finance. A lot of Landlords who are on interest only mortgages and are highly leveraged too are saying they're going to find it very hard in the future if the plans go through. My approach should mean that my exposure to additional tax decreases year after year.

Anyway, back to you, if 5 sales at £50,000 profit, after expenses maybe less, is what you've been making, your war-chest must be high enough to not need to re-mortgage your home, surely? Or have you rolled each profit into the next one and you're sitting on a 1 x ~£50,000 profit from the last one you did?

Anyway, we all find our own way... I am just quite risk averse and would never want to do anything that puts my own home at risk... the homes of others? That's a different kettle of chickens.

Quote from: Plumb on May 05, 2016, 07:56:04 AM...165k paying £360 interest only with rent coming in at £800.

With this my personal approach would be to get it on a repayment basis - what would you pay on that? Not £800. Plus I would raise the rent on a regular basis in modest increments. Possibly to £850 (it's significantly less than 10%), then £900, then £950... in time your rent will easily outstrip your mortgage payment - especially if you've got yourself on a fixed rate of something like 5 years.

Mortgage payment stays the same.
Mortgage interest portion reduces.
Rent increases.
Eventually you own it outright.

It's a wonderful thing.

I guess it all depends on whether you want a modest, say, 10 properties, or you want to keep on acquiring and have, say, 100?

I was talking to a Landlord who 'has' 80 properties the other day. While it's true that he has 80 properties where he is the notional owner, and definitely the Landlord, they're all on interest only and he's leveraged to about 75% across the board. In my mind that's mostly imaginary. Again, I am old skool.

I think i am going to go down the own outright route as owning more and more would just multiply your issues with tennents and maintenance. Im not greedy however i just want to set myself up comfortably for the future.
Yes all the money generated for sales has been put back in and is tied up as equity in the 3. Got bout 90k in residential, 70k in 1st rental and about 50k in 2nd.