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Move over, Trump

21st October 2005 | back to article listings BACK    print this article PRINT

The number of property investors entering the world of buy-to-let has surged in recent times as booming house prices and liberal lending made bricks and mortar more appealing than stocks and shares.

And like any activity, once started it can become an itch for many people - the pleasure of ownership, the virtuous feeling of putting aside for retirement or the kids and above all the smiling face of your bank manager as rental returns come in.

Sooner or later, it will occur to most property investors that hey, there is a living to be made here, and one that doesn't involve a daily 7am commute. And if you have successfully compiled a portfolio of a few properties, how much harder is a few more going to be?

The step from a bit of extra income to being sole income is a big one whoever - most full time landlords will not consider a property investor to be a fully fledged member of the club with less than 40 - 50 properties beneath their belt.

Mortgages for Business spokesman Jonathon Moore believes the key points are the ability to diversify and delegate, says the Times, and emphasises the importance of having trusted agents to keep things running smoothly with a steady stream of rental income.

"First-timers should find a good management agency to sort out tenancy contracts, vet tenants, maintain properties and so on," said Mr Moore. A good spread of commercial and residential property across your portfolio is essential to fill potential gaps or ups and downs in the market, he adds.

When first expanding from a small group of properties it is essential to make sure the books are balanced before they take their first steps. To make a full time living landlords should also learn to trade in property as well as manage it for rental yield, and to juggle re-mortgaging to ensure that they keep costs down and to raise capital for expansion.

Once a steady stream of rental income has been built up, it may be time to consider cutting out property management agents and relying on them purely for tenant finding. This a good way to trim overheads, although if you have diversified your portfolio to spread risk you will have to learn to be able to deal with a diverse range of tenants.

And finally, once the ball is rolling, it will be time to consider setting up as a limited company. Once that is formed you will switch to corporate profit taxes - rather than 40 per cent of all profits, the first £10,000 is tax free, followed by a rate of 19 per cent.

The disadvantage of this is having to fill in two sets of tax returns a year, though the services of a good accountant will pay for itself.

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