Expanding your property portfolio

Some property investors may be wondering if 2023 is the right year to expand their portfolio. Ultimately, it will all depend on their investment goals. While average capital values are predicted to fall this year, this is after double-digit growth during the pandemic and is expected to recover within five years.

Rental prices have also been rising steadily due to a lack of stock, making for a potentially beneficial climate for long-term buy-to-let investors looking for strong rental growth despite slower property price growth.

If you can buy a new build with the latest ecosystems or renovate an existing property to incorporate low-carbon heating and other green features, you’re likely to attract the best paying tenants.

5 reasons why a new buy-to-let investor may consider entering the rental market or an established investor expanding an existing portfolio this year:

1. There is currently a scarcity of properties in the rental market

There’s a significant shortage of rental shock in the market. Rents have been rising consistently over the past couple of years due to high demand from tenants and not enough available accommodation. This competition for new lets has pushed prices up, with many tenants willing to pay above the advertised rental amount to secure a decent home.

However, it’s crucial to research supply and demand in your area to ensure that the property you invest in will not only let well in the current market but also in the future. Tenant types can vary significantly from one part of a town or city to another. Therefore, it’s essential to work with local experts like us to ensure your buy-to-let investment has good long-term prospects.

2. Despite the market slowdown, opportunities are still available

A slowing property market can create opportunities for investors to purchase additional properties. While some buyers may get nervous when property price growth slows, it can enable you to buy a property from a motivated seller at less than the true market value, achieving a speedy sale.

Motivated sellers may be struggling to pay higher mortgage rates or need to access the equity tied up in their home due to personal circumstances like separation or relocation. Finding these sellers and offering them a quick deal that enables them to move on gives you bargaining power to negotiate a reduction in price. Whatever discount you manage to get translates into instant equity in the property and can improve its income returns.

It’s important to consult with local agents who know the area well and have experience identifying such properties with good long-term prospects. With their help, you could find the right investment opportunity that meets your goals and maximised your potential returns.

3. Landlords are presented with an opportunity to initiate, expand and cultivate their business

As some landlords exit the market due to legislative and tax changes affecting buy-to-let over recent years, others have reached the end of their investment strategy and planned to sell around now. Buying a property that’s up to date from a legal letting perspective with sitting tenants means no capital investment is required to make it rent-ready.

You could start earning rental profit from the first month of ownership, offering an instant cash flow opportunity. Working with local agents will enable you to identify such properties and ensure they have good long-term prospects for sustained rental income. With their guidance, you could take advantage of these opportunities and maximise your potential returns as a property investor.

4. As a means of attracting tenants, there is a growing trend of opting for energy-efficient homes

With the government’s target of net-zero carbon emissions by 2050 and a widespread focus on slowing climate change, energy-efficient and environmentally friendly properties are becoming increasingly appealing to tenants, especially among the younger generation.

If you can buy a new build with the latest eco systems or renovate an existing property to incorporate low-carbon heating and other green features, you’re likely to attract the best paying tenants. These properties are cheaper to heat, kinder on the environment and offer more sustainable living option for tenants.

Moreover, funding may be available to help with the cost of improvements. These opportunities will enable you to maximise your potential returns as a property investor, and contribute positively towards reducing carbon emissions.

5. To succeed, it is imperative to stay ahead of upcoming legislation

With the government’s publication of its long-awaited White Paper, ‘A Fairer Private Rented Sector,’ the industry expects regulation of the private rented sector to become more stringent. The proposals include a requirement for new tenancies to have a minimum ‘C’ EPC rating in the next couple of years.

Knowing about potential upcoming changes gives you an opportunity to buy something now that is already compliant with those proposals or carry out any necessary works before bringing the property to the lettings market. This puts you ahead of the competition and ensures that you’re ready for any future legislative changes. It’s also important to ensure that any offer you make is affordable and that there won’t be any issues securing a mortgage.