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Building a BTL portfolio on a budget


Currently I have a BTL via a limited company, with a value of £124k.  There is £53k outstanding on a repayment mortgage with 12 years remaining.  My current interest deal expires in about three months’ time.

I have no spare cash in bank, the rent literally comes in and pays the bills and what's left pays the annual tax return.

The property has long-term, decent tenants who have  been in residence for three years and plan on staying, although this is not a problem as, if they decide to leave, it will rent easily 

I want another BTL with a value of around £100k and plan to use the equity from the current property to raise the deposit, fees, SD etc (max £30k).  Then to repeat this until I have 5 BTL properties.

Do I switch my current BTL mortgage to interest only and also the new mortgage on interest only?

Or the new mortgage on repayment? 

Or switch the current BTL mortgage to interest only for 12 months, get some capital and look at this again in 12 months when prices may have plateaued?

Or go on holiday and forget it all?


There is an inconsistency between your objective (5 BTLs) and your available cash/equity to achieve that, which will require a re-think of how you are going to get to 5 - interest only or repayment is a side issue, your re-think needs to be more fundamental than that.

Switching to interest only will give you a bit more monthly cash flow, but little more than that and will have next to zero effect on your ability to grow your portfolio beyond the next property.

If you remortgage your current BTL at 75% LTV (assuming the rent is high enough) that will be £93k. Clearing your current £53k mortgage will leave you with £40k to re-invest.

If your 2nd BTL is £100k, then the deposit etc. will eat up the majority of that. So your goal of 5 falls over at 2.

Getting from 2 to 5 will require the market value of both properties to increase enough to pull out your next deposit to buy No 3. Waiting for market value increases is a long slow process that will see you well into the 2030's before you hit your target of 5 BTLs.

If that is too slow for you then your re-think needs to encompass forced appreciation - which means you create the uplift in value to refinance and pull out your next deposit, rather than wait for the market to do it for you. This will probably shave 10 years plus off you getting your 5 BTLs.

How do you forcibly appreciate the value of a property? 

Buy it in a dilapidated condition, do it up, then get a mortgage based on the uplifted value you have created. That effectively pulls a big chunk of your deposit money back out to put into the next property.

A barrier to doing that is that the worse condition the property is in, the less likely you will be able to get a BTL mortgage to buy it - because BTL mortgages are essentially given for ready to rent properties, not overly dilapidated ones.

This may lead you down the road of using bridging finance to buy the dilapidated properties and repaying it when you remortgage at the uplifted value. 

This process of buy-refurb-refinance is long established method of building a portfolio from a single pot of cash. The ability to Recycle Your Cash from one property to the next is one of the fundamental skills to master in property investing.

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