Published

January 31, 2024

Are you looking to borrow so you can grow your property portfolio? Our top 5 tips can help improve your chances of success. 

Whether you’re a first-time investor or you already have properties and want to invest in more, building a property portfolio is exciting and can help you reach financial independence. However, growing a property portfolio can be expensive and stressful, even to experienced investors and developers.  

If you need to finance the growth of your property portfolio, read our top tips on how to finance your property investments and accomplish your goals.  

How to finance your property portfolio 

Below, you can find some of the most popular options for funding various property investments to help you identify the best type of finance to grow your property portfolio.  

Commercial mortgages 

When you or your business wants to buy a commercial property, like a shop, office or any non-residential property, a commercial mortgage can help. It works similarly to a residential or private mortgage in that you have to pay a lump sum deposit, as well as a series of monthly payments spread over a set amount of time.  

Buy-to-let mortgages 

You can access a buy-to-let mortgage if you want to buy a property to rent out to tenants to receive a regular rental income. The risk to the lender is usually higher with a buy-to-let mortgage than a residential purchase you’ll live in yourself, so it requires a larger deposit than a private mortgage.  

Buy-to-let portfolio mortgages 

If you’re a landlord with a minimum of four rental properties, you can use a buy-to-let portfolio mortgage. A portfolio mortgage allows you to take out one mortgage to cover all of your investment properties, rather than having several mortgages from different lenders.  

As a portfolio mortgage enables you to have all of your buy-to-let mortgages under one umbrella mortgage, you only have one account to manage, one monthly payment, one statement and one set of interest rates for the whole portfolio.  

One of the benefits of a buy-to-let portfolio mortgage is that you can register your portfolio as a limited company, which significantly reduces your tax liabilities. Another advantage is that you can draw down equity from the entire property portfolio value to purchase more properties and avoid paying costly re-mortgaging fees on several accounts.  

Auction finance 

Investors or developers on a tight budget might consider buying a property at auction to grab a bargain. If you win a property at auction, you have to pay a non-refundable deposit, usually 10% of the purchase price, and the balance within 28 days. Since the timeframe is tight, traditional funding is unsuitable, unlike auction finance.   

One of the benefits of auction finance is the speed at which funds can be approved and delivered, often before you walk into the auction house. That means you can attend the auction with an agreement in place, enabling you to bid with confidence. Many lenders specialise in auction finance and can help you secure a bargain at auction and meet the tight deadlines to complete the purchase.  

Bridging loans 

A bridging loan is a type of short-term finance that’s easier and quicker to access than a mortgage from high street lenders, often within days or weeks. With a bridging loan, the lender takes a first charge on your property and exits once you repay the loan.  

You can use a bridging loan to acquire the money you need to fund the purchase of a property you want to rent out or renovate and sell on for a profit. Bridging loans are often taken out to cover the gap between two transactions, such as the purchase of a property and the sale of another property.  

The average duration of a bridging loan is 12 months, and you have to pay interest over the loan term. If you fail to meet repayments, the lender can repossess the property and sell it to a new buyer.  

Property development finance 

If you need to refurbish an existing building or develop a new one, you can apply for property development finance. This type of finance is usually a short-term loan of up to 24 months to help cover any refurbishment and building costs, with some lenders willing to convert these loans into mortgages when you complete your projects.   

Top 5 tips for growing a property portfolio 

Here are our top 5 tips for building a successful property portfolio: 

1. Start your portfolio with one investment 

It’s rare to hear of new investors who purchase multiple properties, so start small and choose your first property wisely. Your first property will set the tone for future investments and, if done correctly, can be very rewarding.  

Before making a purchase, consider whether you prefer to live close to the property so you can manage it yourself or if you’re happy for it to be located further afield and looked after by a management company. If you’re a new investor, it’s generally recommended you buy your first property within a local area you know well.   

2. Do your research and know your tenant 

Doing your research helps you avoid problems and making mistakes, so be sure to research the location of the property you wish to buy. There’s no point in buying a property you want to rent out to students in an area with no universities. Remember, you’re not looking to live there yourself. It’s about what your prospective tenants will like and want.  

3. Buy at the right price 

The dream investment is to buy below market value and sell at a higher price to provide a strong return. Also, many sellers want to make a quick sale, so don’t be afraid to make a low offer and negotiate from there.  

If you can, avoid buying when the market is booming. Otherwise, you’ll have a long wait to see a decent return. One of the best times to buy is when property prices begin rising again after hitting rock bottom.  

4. Reinvest your profit 

Although it can take time to build up funds, reinvesting your profits into new property investments is one of the best ways to help grow your property portfolio. Before you reinvest your profit and settle on a property, you need to figure out if the rental income will exceed expenses and whether you can handle any unforeseen setbacks. 

5. Refinance your property portfolio 

It’s possible to refinance a property portfolio if you want to consolidate several loans and own four or more rental properties. When you place all of your mortgages under one mortgage, you can reduce costs, maximise the potential for returns and boost your borrowing power. It also makes life easier for you because you have only one account to consider. 

Need help raising finance? 

No problem. The Provide Finance platform can match your borrowing requirements with tailored lending solutions from over 200 options. 

All you need to do is submit a loan enquiry onto the Provide Finance platform to view your list of lender matches and chat directly with them before choosing the best deal and getting terms in place to process your loan.  

This smart-search matching process saves you time by presenting only the best available option to you in one central dashboard. You’re able to monitor the progress of your deal in real-time while receiving full support from Provide Finance’s team of expert advisers.  

If you want to get started right away, sign up free by submitting our built-in enquiry form. If you have any questions or prefer to speak over the telephone, call us on 0800 7723 180.

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