How To Make The £8 Billion BTL Boost Work For Your Portfolio

The buy to let (BTL) market has been looking increasingly robust for the past year. Old lenders have returned to the market with wide ranges of products and new lenders are appearing on a regular basis. This is excellent news for investors looking to grow their UK portfolios.

Go straight to our new UK deals right away, or call us on +44(0)1273 447 300 to find out more about what we have in the pipeline for you. Read on to find out more about the UK property market right now, today and how to make it work in your favour.

95% of non-homeowners unable to get on the property ladder

Lenders are jumping on the BTL proposition because they can clearly see the opportunities in this era of ‘generation rent’ (a term ironically coined by a mortgage lender!). Data from the National Centre for Social Research (in association with Halifax) provides proof.

The research shows that while 77% of non-homeowners still aspire to owning their own home one day, very few believe it is possible in the current climate.

• 64% of 20 to 45 year olds believe they have no prospect whatsoever of getting on the residential property ladder.
• Just 5% of this group are saving for a deposit, while the other 95% say they either don’t have enough spare cash to save, or have become so disheartened by the plight of prospective first-time buyers, they have simply decided not to even try.

£8 billion in BTL lending over next 3 years

By contrast, the BTL market is set for strong growth, with some forecasters estimating about £8 billion in additional lending over the next 3 years (to 2014). The BTL market can be seen as the polar opposite of the first-time buyer market. The strength and optimism in BTL can almost be derived from the weakness of first-time buyers.

There are now more BTL products than at any time since the summer of 2008, just before the market was meant to have crashed. At the time of writing (August 2011), there are 481 BTL mortgage products available. This compares to just 295 when the market started to pick up again a year or so ago. What’s more, loan to value ratios are ranging from 70% to 85% and we have seen rates as low as 3.5% on some products.

It is no surprise that we can see a growing group of BTL lenders offering competitive deals!

Almost 8 million need private rented accommodation in the UK

According to the Council of Mortgage Lenders (CML), 7.98 million people currently live in private rented accommodation. This is a larger proportion that the combined numbers who live in local authority properties, or rent from a housing association. And rents continue to rise!

The average rent in England and Wales is currently £695 per month and, with seven tenants chasing each home for rent, rental gazumping and sealed bidding wars are becoming the norm.

Portfolio landlords “the driving force”

Indeed, portfolio landlords are the driving force behind the growth of the private rented sector. Research from the Association of Residential Letting Agents (ARLA) shows the average portfolio size is 8 properties, although the largest landlords in the UK can count over 300 properties in their portfolios.

The argument for investing in BTL is clearly compelling. There are also a number of factors and guidelines BTL investors should consider when growing their portfolios using BTL mortgage financing.

Points to consider

• Some lenders will only allow a certain number of BTL mortgages to be held by one investor, so bear this in mind if growing a large portfolio primarily funded with mortgage finance.
• Ensure you make full disclosures on applications. Failure to disclose credit deals, or linked addresses showing up, will lead to declines.
• If you are remortgaging, you need to be a home-owner already. This applies if you are remortgaging your own home to release capital to invest in BTL, or if you are remortgaging an existing BTL to invest in another.
• You will typically need written confirmation of projected rental income AND another income source beyond the BTL property.

Remember also that your portfolio should be created to meet your own, individual requirements. If, say, you are looking for a ‘fast flip profit’, then UK BTL is not the best choice for you and you should look at alternative propositions, such as our investments in Memphis, USA, which deliver a 40% target profit in just 12 months (on single properties) and 140% in 2 years (with bulk wholesale properties).

If you are committed to building and holding your property assets over the long term, whilst generating a stable and increasing rental income, then BTL investment in the UK is perfect!

Next steps for success

Call us today on +44(0)1273 447 300 to find out what UK BTL can do for you, how to find the best BTL finance deals to suit your own individual needs and to start growing your UK portfolio right away.

Live with abundance,

Rod Thomas, FCA

Posted in UK Property News

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