How to future proof your property portfolio
Posted on 20th January 2023 at 12:57
How to future proof your property portfolio
The changes in mortgage products, house prices and buyer sentiment in the final months of this year
(2022) have caused many investors and landlords to reassess their portfolios or future purchases.
Lender stress tests are stricter than ever, interest rates on the rise and house prices expected to drop
which is making many reassess their options. But this is not all doom and gloom, with any market change
or time of uncertainty there is opportunity in abundance.
Over the last few months, we have personally seen through our work and on Rightmove investment
properties hitting the market as some long-term landlords offload their stock as they venture into new
investments or plan for retirement. Unfortunately, we are also seeing some people being forced to sell
their homes due to the rising cost of living at a time when demand is slowing which will result in selling
below market value if they need a quick sale. These properties offer opportunity for investors who have
cash readily available and a long-term view on property. The capital gains tax reduction for 2nd properties
which will take effect from April 2023 which sees capital gains allowance halved will see landlords offload
properties before that deadline to save on tax.
If you are one of those investors who has a portfolio or is still looking to invest into 2023, there are few
things you can do to help future proof your portfolio and navigate these times.
When was the last time you reviewed the rent on your properties? Inflation currently sits at 11% which
has increased the cost of all goods and services in the UK. Rent should be no different. As your
mortgage payments will increase and the cost of labour to fix any maintenance issues you should check
your rents to make sure your rents are in line with this increase. You should also check the rents
achieved by similar properties within your location also to see how your rent compares to similar
Run stress test calculations
Whether you are buying with a mortgage or refinancing with a mortgage, you should check that the rent
you currently receive or expect to receive is enough to satisfy the lenders stress test calculation. How
you hold the property e.g., ltd company or own name, the loan size, rent received, and your tax banding
will determine how much you can afford to borrow. So, if you are pricing up a deal or a refinance, best to
check yourself first to see if the rent you receive can facilitate that lending. If the rent isnt enough you
may need to pass on that deal, if the rent isn't far from the amount you need, can you increase the rent to
hit that target? To run a stress test calculation, use the calculator here:
Review your properties
Do you have underperforming properties within your portfolio? Do you have properties that don’t
cashflow very well? Or properties with lots of maintenance issues? Problem tenants or very little capital
growth? These properties can be a drain on your time, effort, and resources. You may benefit from
selling these properties to free up capital to reinvest elsewhere or fund your lifestyle. Similarly, if you
have properties performing well, can you invest in more properties like those? Or you could change
these properties into HMOs or serviced accommodation to increase their cashflow as opposed to
standard family lets.
Review your mortgages
If you currently have mortgages on your properties, running a health check on these could lead to a large
saving. Whether that be finding a new fixed rate after you moved onto the variable rate or switching to a
different type of mortgage altogether e.g., repayment to interest only. Or from a fixed rate to a variable
Review your strategy
Have you typically stuck to family lets and not considered any other type of strategy? Rising interest
rates and stagnating mean family lets aren’t bringing the returns they were in previous years. To increase
cashflow for investment properties many investors are turning their attention to HMOs (houses multiple
occupancy) and serviced accommodation (Airbnb for example) in which tenants pay for week per room
generating much more income. We are seeing a huge increase in enquiries for HMOs and Serviced
accommodation as landlords look to maximise their income from their investments.
EPC changes coming in 2025
Now the changes to EPC regulation hasn’t been confirmed but it has been heavily hinted by the
government over the past few years. The expected change is to see all let properties hold an EPC rating
of C and above by 2025. How the Government will enforce this is to be seen but with this potential
change on the horizon it makes sense for landlords and investors to start to think about this possible
change and to make improvements to their current properties. Not only will the changes help your
properties to comply with the regulation changes but also make your properties more attractive to
The best way to prepare for these changes would be to consider the EPC rating of a property when you
purchase it in the first place, the second opportunity would be if you are completing a renovation of the
property before your first tenant moves in. So, when you are modernising the property for the tenant, you
can also turn your attention to EPC rating as well as the cosmetics. For example, whilst the property is
empty and being refurbished you could insulate the loft or replace the boiler.
In all markets there is always opportunities to find property deals and if property is a long-term
investment for you time is on your side that will allow you to ride out any market turbulence. If you have
any mortgage queries or would like to review your portfolio, please get in touch.
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