Time for an annual portfolio review?

With the new portfolio lending criteria that came into effect last October, it’s more important than ever to make sure you carry out a review of your property investments at least once a year, to check how they’re performing and whether your capital is still in the best place, working as you want and need it to.

Here are five key areas you should be looking at:

       1. Do your LTVs stack up?

If you already have four or more properties or are planning on buying your fourth this year, you must ensure the total borrowing across your portfolio does not exceed 75% loan to value. Although the majority of landlords have overall LTVs of below 60%*, those who borrowed at 90%, thanks to deals that were available pre-credit crunch, might find the next few years somewhat of a challenge.

If you fall into that category and were either planning to refinance to pull out some capital or your mortgage term is coming to an end, unless your property has grown sufficiently in value, you may struggle to meet your goals.

For example:

  • · Purchase price in Jan 2008             £150,000
  • · 90% LTV mortgage (int. only)   £135,000
  • · Value in 2018         £176,805
  • · (average UK house price increased by 17.87% between Q1 2008 and Q4 2017)**
  • · 75% max LTV mortgage (int. only)    £132,604

In this case, the landlord would have to invest more capital in order to remortgage, as there is a shortfall of £2,396 in the repayment of the original borrowing.

So, if you haven’t done so already:

  1.  Check the LTV of each mortgage
  2.  Find out how long the remaining term is
  3.  What is the outstanding loan amount

Then speak to your local agent to secure an idea of how much the property is worth or secure a formal valuation from a RICS surveyor at https://www.ricsfirms.com/

Once you have valuations and outstanding borrowing figures, you can calculate the current LTV for each property and the portfolio as a whole.

If the total borrowing is above 75% LTV, you will have to decide how best to move forward. Our advisers can give you a free review of your mortgage position and offer advice on your financing options for ensuring your portfolio is viable moving forward, simply get in touch with us.

       2. Are you on the right mortgage deals?

Whether you’re a portfolio landlord or only have one property, it’s a good idea to check with a broker each year that you’re always on the right deal for your circumstances. New products are coming out every day in this highly competitive market and, even if you’re still within an initial ‘lock in’ period, you may discover it’s worth paying the redemption penalty to secure a better rate over the longer term.

If you are planning to hold property into your retirement, it’s particularly important that you are with a lender who will allow you to hold a mortgage beyond 75 years of age.

So get in touch with Mortgage Advice Bureau as they will be able to review your current deals, free of charge – even if they find you are still on the right deal for you.

       3. Are your properties keeping up with averages?

Even if you are happy with the returns you’re getting from your property portfolio, you should be keeping an eye on how well your properties are growing in value and whether your rents are below or on par with the rest of the market and compare these with local and national average figures.

       4. Are your costs as low as possible?

The cost of the utilities, products and services you use in your property business are constantly changing, as a result of competition, availability or the wider economy. That means your expenditure can go up and down – but usually up! - so it’s well worth checking whether there are better deals available. At the same time, remember that you rarely get value for money from the cheapest option, so do balance the spend versus the quality of the product or service.

And if your mortgage is at more than 50% LTV, the repayment is likely to be your biggest monthly cost, so check you’re not paying more than you need to.

       5. Review your rent

Although you can’t simply raise rents because you want to, regardless of whether your own costs have increased, you may discover you are able to charge a little more – particularly if you have had the same tenant for some time and haven’t yet reviewed the amount they are paying.

It is important to know that, unless the tenancy agreement states otherwise, you can’t raise the rent without the tenant’s consent within the initial fixed term, after which, you must give them at least one month’s notice. If the tenancy is periodic, you can’t increase the rent more than once a year and any increase you propose must be fair and detailed in writing - either with a new tenancy agreement, an official notice proposing the new rent, or any other written agreement signed by both parties.

To check whether you should be able to put the rent up, speak to local letting agents and ask whether you could be getting more rent. Even if you are letting and managing your properties yourself, most good agents will be happy to have an honest conversation and give you their professional opinion.

 This information has been provided by our partner Mortgage Advice Bureau. For more information relating to Mortgages or for Mortgage Advice please visit Mortgage Advice Bureau.

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