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Investing in a property portfolio is a business not a hobby

Investing in a property portfolio is a business not a hobby

By Anthony Irving  //  Mon 2nd December 2019
Whether you’re a new buy-to-let landlord, with one or more properties, or an accidental one following an inheritance or house move, there are steps you can take to establish yourself as a property professional
If you have money to invest or want an alternative source of income for your retirement, a buy-to-let property portfolio can bring a very profitable return.

While the buy-to-let landscape for landlords has changed a lot over the past decade, interest rates are still low, buy-to-let mortgages are more affordable and the property business is still a reliable source of income.

Central London will always attract tenants and your property portfolio is likely to hold its value in the long term. In an uncertain property market, however, experts recommend that you focus on your investment as a source of rental yield - not capital growth through a house price gain. You may need to hold onto the property for a long time to see it truly increase in value.

Before you decide to start a property portfolio, you should also consider whether you have the cash flow to buy rental homes – most lenders will look for a deposit of 25% before they grant you a buy-to-let mortgage. A deposit of 40%+ will get you the best deals.

Another consideration is whether you have the time to devote to the project. Above all though, the key to success is being professional and understanding that your lettings venture is a business like any other.

Whether you’re a new buy-to-let landlord, with one or more properties, or an accidental one following an inheritance or house move, there are steps you can take to establish yourself as a property professional:

1. Get organised

Organisation skills are crucial in business. For a property investor, being organised means keeping a record of all documents related to your tenants, property and finances. Set up a clear and accessible filing system for paper and online documents.

2. Treat your tenants as customers

You’ll want to be friendly and approachable with your tenants, while remembering it’s a professional relationship. By being helpful, easy to contact and on top of repairs you’ll encourage your good tenants to stay in the property, eliminating the dreaded void periods.

3. Research your market

Like any savvy businessperson, you need to have extensive knowledge of your customers. If you’re buying to let, think carefully about location. Begin by trying to envisage the sort of tenants you’ll be aiming to attract, then look for somewhere that’s going to appeal to them.

If, for example, you’re looking at young professionals, you’ll probably want a lively area with good transport links and plenty of amenities. Having a good idea of your target market will help you to style and market the property to their tastes and needs.

4. Understand the industry

Get to know the lettings industry inside out - and the relevant legislation and regulations. The buy-to-let sector has been subject to multiple changes in recent years, with stamp duty increases and changes to mortgage tax relief, as well as stricter rules around gas safety and energy efficiency.

You need to know about the checks to be completed before your tenancy agreement is signed and your legal obligations to protect your tenants’ deposits in a government-backed scheme. Read more about your responsibilities on the gov.uk website.

5. Get your tax right

HMRC classes all the rent landlords receive as income, which means it must be declared on your end-of-year tax return. If you are currently in employment, and are taxed by PAYE, you will need to register for self-assessment. If you do not usually send a tax return, you need to register by 5 October following the tax year in which you received rental income.

As a landlord you will pay tax on the profit you make after allowable expenses have been deducted. Read more about tax, self-assessment and allowances for landlords on the gov.uk website.

6. Consider setting up as a limited company

Recent taxation changes meant that setting up a limited company could be a more efficient way of managing your property investment, especially if you’re looking to build your property portfolio.

If you’re a higher rate taxpayer, who owns rental property through a limited company, you’ll pay corporation tax on profits at a lower rate than income tax. There are costs to consider too, so get advice from an accountant.

7. Don’t forget insurance

When letting out a property that you already own, it is vital that you let your buildings and contents insurers know what you’re planning. Fail to do so and your insurance policy may not be valid. It’s also advisable to take out landlord insurance and public liability insurance to protect you against any incidents that take place in or around your property.

Letting a property as a business can make the difference between a profitable investment and one that flounders. If you are thinking of investing for the first time, and have central London in mind, contact Plaza Estates for advice and to find out more about the properties we have available.

Offices at

Marble Arch
29 Edgware Road
London
W2 2JE
f: 020-7258-3090
Knightsbridge
34 Beauchamp Place
London
SW3 1NU
f: 020-7581-7005