Why now is a good time to expand your buy-to-let portfolio


We discover why buy-to-let landlords should increase their portfolio following the pandemic.

The past few months have undeniably been difficult for a majority of the UK and other areas of the world. The pandemic has likely changed any plans you may originally have had at the beginning of the year. No one could expect or envision the pandemic or its impact, not only on our health but also our economy.

To help revive the economy, the government released several updates including reduced stamp duty rates to help keep the housing market going, this is a massive bonus for those looking to move and for buy-to-let landlords who want to increase their portfolio.

Before the pandemic

If you were considering purchasing an additional property before the pandemic, you would have been faced with extra charges such as an increase in stamp duty tax with a surcharge of 3%, reduced tax relief for buy-to-let landlords and capital tax gains when you eventually go to sell the property.

Previously, the government’s aim was to prioritise those who wanted to enter the housing market by making it easier for them to purchase their first property and make it harder for landlords to expand their portfolio.

If you are in the position of being able to invest in more properties, now may be the perfect time.

Let us explain why.

Why now is a good time to expand your buy-to-let portfolio?

Here are some of the reasons why now is the time to consider adding to your property portfolio.

Stamp duty tax reduced

You may have heard recently the governments new package to kick start the economy after lockdown includes a reduction in stamp duty tax. The housing market was particularly hard hit during the lockdown as no one was allowed to physically view another house, nor were they allowed to move.

As restrictions have eased, the stamp duty reduction is hugely welcomed by not only home movers but also buy-to-let landlords.

You are currently no longer required to pay the standard 2-5% stamp duty on main home properties of the value between £125,000 – £500,000. If the property you are purchasing is an additional property, landlords will only need to pay the 3% surcharge which is payable on all buy-to-let properties or second homes.

The cut in stamp duty means that landlords will see their tax bills start at a rate of 3% on properties costing up to £500,000. This means you won’t have to pay the original stamp duty of 2% of properties between £125,000 – £250,000 and 5% on properties worth between £250,001 – £925,000.

The reduction in stamp duty is to last for eight months, ending on 31st March 2021.

Property prices dropping

As people lose confidence in the economy and with people losing jobs, the property market has taken a small hit with a decline of 0.1% in property houses, bringing the average house value to £216,403 in June.

House prices have been on the incline for the past 8 years, and with the rise expected to continue in the following years to come, now may be the chance to benefit from a bargain. Depending on how the markets go, if it continues to grow in a couple of years, this could potentially be a good investment opportunity.

Increase demand for rental properties

Buying a buy-to-let property, you need to consider what the rental market is like and whether you can find someone to live in your property to pay rent.

According to recent surveys and research, the UK rental market has been booming during the lockdown. There is currently a tenant demand for rental properties with an increase of 33% in May compared to this time last year.

This may be a sign of the rental market starting to recover. When the demand for rental property increases, it usually follows that rents will increase too.

Buy-to-let products have increased

Buy-to-let product numbers have increased between May-June 2020 by 280, bringing the total of mortgage options available to 1,735.

This means that Buy-to-let landlords can now benefit from the biggest variety in mortgage options. Some five-year fixed rate buy-to-let mortgages have seen product numbers rise the most.

According to recent research, borrowers with a fix for five years with 80% loan to value will see the biggest rate reduction with the average being -0.67%.

Things to consider

Before committing to expanding your property portfolio, there are other extra costs and things you need to consider.

Rent break

As coronavirus has shut down a large majority of the economy, a lot of people have or will face losing their jobs.

With this in mind, there may be some tenants who will struggle to pay their monthly rent. You will need to make sure you have enough funds to cover any costs if you lose any tenants for a period of time, or if they are struggling financially.

Landlords Insurance

Landlords insurance is vital to keep commercial or residential investments safe during and after the pandemic. It can protect you for buildings and contents cover, loss of rent, damages and forced closure. This will help to protect you from most unexpected costs.

Use a financial advisor

Please be advised, all information provided in this article is based on research and market information, if you are considering purchasing additional properties, you should visit a financial or mortgage advisor.

As the lockdown continues to ease and the economy starts to open again, this may affect property prices and interest rates. But as it stands at the moment it looks as though the buy-to-let market is growing. 


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