Real Estate Investment:Today

Feature: How to Better Manage your Property Portfolio in 2022

By Mike Coates, director at Commercial Expert

Property investment continues to be a sought-after market into 2022, with recent research by Shawbrook Bank finding that 34% of landlords are looking to expand their portfolios in the next year. As a result, the rental market is on fire and buy-to-let properties are continuing to grow. What’s more, investors are continuing to choose brick and mortar investments over alternative ultra-volatile markets. This makes for the perfect opportunity for anyone looking to switch up their portfolio.

But, whilst property is a great investment, there are several things you need to be aware of if you’re serious about it and want to better manage your portfolio in 2022 – whatever that looks like.

Beware of rental voids

The fact of the matter is all landlords are going to experience a void property at some point. The key is to try and ensure the possibility of a void property is kept to a minimum.

Particularly amid the increased cost of living, people may no longer be in a position to continue renting in certain areas, making voids more likely. Ultimately, this leads to increased outgoings without rental payments to cover it.

The UK’s Rental Index for 2021 showed that on average a landlord (outside of London) loses £847 in rent every month their property is empty. To help avoid a rental void, an immediate thing you can do is ensure you are looking after your tenants. After all, if your tenants are happy in their home, why would they want to leave? By ensuring you are meeting their needs, they are more likely to be satisfied and stay as long as possible.

It is also important to ensure your property is up to date. The best way to approach the situation is to ask yourself “would I be happy living here?”. Another is to understand the demographic of your ideal tenants and make it perfect for them. For example, if you offer furnished lettings, making your property work from home friendly is a current ideal for many renters looking for a combined living and working space.

Buy-to-Let?

With the rental market continuing to grow, investors are seeking out buy-to-let properties rather than the volatile markets that may not yield the right returns.

Lenders are currently offering more diverse solutions to investors who are looking to diversify their portfolios safely. With the likes of holiday lettings, Houses in Multiple Occupation (HMO) and Multi-Unit Freehold blocks (MUFBs) offering investors opportunities to reap the reward of multiple tenancies from one core investment, these property types are a great way for you to expand your portfolio and also lessen the possibility of risks.

EPC Legislation – act now

Energy Performance Certificates provide detailed information regarding your property’s energy efficiency, as well as its carbon dioxide emissions. Previously all properties being sold or let must have had a minimum EPC rating of ‘E’ or above.

However, the government has announced that the minimum EPC standards for England and Wales must be raised to help meet the net-zero target by 2050.

So, by 2025, all rental properties will need an EPC rating of ‘C’ or above, with those with invalid EPCs being fined a penalty of up to £30,000.

The changes necessary to get your properties up to ‘C’ standard may be costly – the government estimates the average cost for a landlord to get their property to standard is around £4,700.

Landlords who are set to be affected by the high cost of change are encouraged to apply for the Green Homes Grant sooner rather than later, which covers at least two-thirds of the cost of tradespeople necessary for the upgrades.

Refinance your portfolio and releasing equity

A great way to increase your property portfolio is to utilise the equity within your existing portfolio. Over the past few years, property prices have risen and the opportunity to release capital has never been as easy. And, with some lenders now allowing up to 80% LTV, it’s the perfect time to release those funds. If you don’t want to use the equity as a deposit for additional properties, you could invest in a refurbishment project on either an existing property or one from auction.

Another option is to review your entire portfolio and assess whether it could be covered by one loan – yes, amalgamate them all to one lender. This happens more often than not as portfolios continue to grow and payment history builds up, because borrowers have a stronger case and thus, achieve lower rates. Hunting Pots are also starting to return, so this option could even see borrowers given a maximum amount they can borrow which exceeds their existing portfolio value and allows for additional growth.

With both of these options, bear in mind that whilst refinancing may mean the monthly payments reduces, there could be some initial costs due to arrangement and professional fees.

Fix interest rates

Interest rates are on the rise, so now is a great time to fix your rates. The Bank of England will no doubt increase their base rates again this year – some think to around 2% – so it’s better to act sooner rather than later.

With inflation and interest rates continuously rising, stress levels among property investors are rising on par. Quite rightly too. Now more than ever landlords need to ensure they are getting the best deal for their mortgage repayments. Fixed rates are ideal for this as they do not change in line with inflation, meaning you are cost-protected during times like these.

The boldest of property investors are not afraid to switch lenders to ensure they are keeping their costs reduced. Though, it is important to work with a specialist broker on this, who can help you navigate through the market.

Use a reputable letting agent

It is important to ensure you are using a reputable letting agent, should you choose to use one. It is often the case that some landlords simply want the cheapest agent available to ensure their overheads are reduced.

However, investing in the right letting agent is important as poor services from an agent could ultimately cost you more in the long run.

The clearest cut way to ensure you are choosing a reputable letting agent is choosing agents who are industry body registered. The main bodies for letting agents are the Association of Residential Letting Agents (ARLA) and the UK Association of Accredited Letting Agents (UKALA).

To be recognised by these bodies, agents must adhere to proper practice and a benchmarked standard, meaning they are more likely to be trustworthy.

It is also important to ensure your chosen agent understands the local market for your property type. You want to be sure they can attract the right tenants for your property, and understanding the local market is imperative for that. It also means they can help to accurately advise of the perfect rent pricing.

Seek professional advice

When exploring finance options, it is within your best interest to use a specialist commercial broker, who understands the ins and outs of the market you are operating in. The truth is, many mortgage advisors no longer have full access to opportunities available for buy-to-let investors both on a personal level and through a Limited Company.

A broker can help you understand the full extent of your finance options, which are often not provided by other advisors. For example, Bridge-to-Let is often overlooked by investors, despite it being a relatively flexible and quick option. This is exactly why investors should seek advice from brokers, as they are able to consider all options before proceeding. Plus, some brokers have existing relationships with trusted and rapid solicitors, and this could bypass some of the delays being witnessed within the commercial lending sphere.

Due to the increase in prices, it can be a good option to consider looking at properties to renovate, such as dilapidated buildings, and then refinancing upon completion. But again, with this alternative, seeking professional advice is advised to ensure you are making a safe investment that will bring you a return.

Landlord insurance is a must for proper portfolio management, and a broker is necessary for helping you find the right cover. Whilst cheap policies may bring you initial peace of mind, they may cost you more in the long run when they do not cover all of your risks. Using a broker for your insurance means you can find the right balance between cost and cover and are secure with the fact the properties within your portfolio are fully covered.

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