Andy McQueen is managing director of Nationwide Specialist Lending
“Brian should consider a number of options in order to ensure he is getting the best return on his current properties. Property improvement, reducing management costs and ensuring he is targeting the right rental audience should all help increase rental yields.
Mortgage costs will be one of Brian’s biggest expenses so he should consider shopping around for the best deal and remortgage if necessary. As his properties haven’t been valued for a few years, it may be possible for him to utilise the equity in his current portfolio in order to purchase another property.
If he remortgages to The Mortgage Works, we would base the maximum advance on the total portfolio value. This may free up equity that could be used to fund a new purchase. We take the same view when looking at rental income, so any of his high yielding properties could be used to support a new purchase. This could be useful if Brian acquires more properties in the future.”
Cath Hearnden is director of My Mortgage Direct
“Brian should compare the rent he receives on each property with the interest he is paying which he can offset for income tax purposes. If there are no early repayment penalties on his mortgages he could consider structuring the loans so that each property is self-financing. This would maximise the tax efficiency of the portfolio.
He should aim to keep each mortgage at as low a LTV as the property and above factors allow as interest rates are often lower. However, he should be wary of remortgaging to make only minor changes as fees tend to be quite high.
If Brian would like to put himself in a position to be able to buy other properties quite simply, he could consider portfolio lending, where the loans are based on the total LTV on the total portfolio and allow pre-agreed borrowing for additional properties. To maximise the potential profit he could consider capital and interest deals.”
Jonathan Harris is associate director at Savills Private Finance
“Brian should update the property values and review existing mortgage arrangements. If Brian hasn’t remortgaged for several years, this could reduce his costs. He should consider a mix of fixed and tracker deals to achieve a balance between market-leading rates, security and flexibility.
He should then review his rental arrangements. Does he need to increase rents on the properties? This could increase income and provide scope for increasing borrowing facilities.
The next step is to consider gearing up to broaden the portfolio. It may be possible to raise deposits for new purchases in areas with higher potential rental yields if he has built up significant equity in his portfolio.
When gearing up, he should consider opting for interest only loans so these can be offset as an expense for tax purposes.”
The most important thing is to secure the services of a good broker. This will make Brian’s job easier and ultimately ensure his rental business is successful.
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