Four tips for managing a high net worth Buy to Let portfolio
Posted on 22 November 2018 by
Buy to Let (BTL) portfolios, as with any investment or business decisions, require proper reviews to assess their strengths and weaknesses and that any money spent is well placed and not wasted. On that note I want to share with you my top five strategies/tips for managing a HNW funded BTL business:
1. Spread your risk – you might be able to put down a deposit on a £3m house in Parsons Green, but you are putting all your eggs in one basket. Firstly you are limiting your potential tenants to one part of the rental market; and secondly any rental voids (times when your house is not let) will be expensive. Depending on your individual circumstances, you could be better off buying three or four flats at £500,000 each and spread your costs and risk that way.
2. Be smart with your taxes – always speak to your tax adviser, accountant and solicitor, in conjunction with your mortgage broker, before making a purchase. It’s always good to model your potential tax liability and tax savings on both a personal basis and a limited company basis. Once you have these figures your mortgage broker can confirm the relative costs of raising finance in your personal name and using a limited company, and so make an informed decision.
3. Use your main residence wisely – you may wish to capital raise against your home to go towards the deposit of your new BTL. If you are doing this, and you are buying a new property immediately, make sure that the mortgage funds go straight to the purchase solicitor and not to your account. This way your accountant can confirm to HMRC that the funds were used to buy an investment property, and potentially the interest that you are charged on that capital raise can be offset against the rental income. Confirm this with your accountant as there are variations to this.
4. Balance your portfolio – are you planning to buy for growth, income (current or future) or both? You might be using your investments to go towards your retirement strategy, which may involve taking a lump sum out of the properties, or simply an income from the rent. Either way planning ahead is the key, and a balanced portfolio might contain a couple of houses for capital growth and some flats for income. Each individual case is different, but it’s important that you consider what you want out of the investment at the end.
If the above has inspired you to start or review your BTL portfolio, or if you want further bespoke advice please enquire here or call: 0344 346 3672
The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.