How to Maximise Your Buy-to-let Profits in 2020

by | Mar 9, 2020 | Bridging, BTL, Commercial, Mortgages, Property development

2020 has so far seen the lowest number of Landlords since 2012 and with more new legislation changes set-to come into play in 2020, many Landlords are feeling the strain.

However, it is still possible to earn a healthy living from investing in buy-to-let property. Here are five ways you can maximise the profit from your current property investment portfolio…


1. Re-mortgage to a better rate

In an effort to claw back some profit from your buy-to-let, it could be worth re-mortgaging. According to data from UK Finance, 13,300 landlords re-mortgaged during December 2019, an increase of 2.3% year-on-year.  Average mortgage rates for landlords have fallen by 0.3% in the last 12 months, which means now could be the best time to switch to a better deal.

Most lenders allow you to secure a new mortgage up to six months before the end of your current fixed term. If your current fixed term is due to end in the next few months, now is the time to speak to your broker.


2. Consider setting up a company

Changes to mortgage interest tax relief in 2020 is one of the biggest threats landlords face, particularly the higher-rate taxpayers.

One way around this is to set up a limited company structure for your portfolio as this allows you to offset your mortgage interest when calculating your tax bill, and instead pay corporation tax on your profits.

Buy-to-let mortgage rates for companies are typically around 1% higher than for individual investors. Moving to a company structure requires you to ‘sell’ your properties to the company, so you’ll also need to pay stamp duty on the transaction.

Setting up a limited company is generally only wise if you’re a professional landlord with larger property portfolios. If you’re a fairly new landlord with a small portfolio or just one or two properties, the costs can outweigh the benefits.


3. Reduce your management costs

Property management costs are one of the biggest expenses for landlords, whether it’s for a management service to look after your properties or forking out for regular maintenance and repairs.

Depending on the size of your property, the area it’s in and the agent you use, a full service can cost between 12% and 20% of your rental income!

If your portfolio is a manageable size, it’s worth considering whether you can manage the property yourself or downgrade to a lower management package such as as a tenant find – even if it’s just for the time being to cut costs.

If you’ve built a long-term relationship with an agent, try negotiating a better deal. Given that more and more landlords are considering managing their own properties, agents will be keen to negotiate the best deal – which means it’s worth shopping around and comparing quotes.


4. Look after your tenants

Looking after your tenants is the best way to ensure you have a steady stream of rental income. With plenty of rental options available, if tenants feel like you are not looking after them or the property, they will simply find somewhere else to live. This means you’ll have an empty property until a new tenant is found and additional costs to pay.

And when the tenancy is due for renewal, it’s important to weigh up whether you should increase the rent, or risk losing good tenants. Quite often, Landlords take good tenants for granted and ruin a good thing my pushing for rent.


5. Consider additional investments

While it’s currently a tough climate for landlords, it’s also a great time for savvy investors to capitalise on new opportunities.

Low interest rates, relatively low house prices and tenant demand mean landlords willing to invest could see healthy returns in 2020.

Additionally, recent research from Hamptons shows the average rent rose in every region of Britain in January and with house prices predicted to rise, landlords could benefit from growth in rental yields and capital gains.

Whether you are a first-time or experienced landlord,  we can help you source the best mortgage rate or finance deal for your portfolio or set up a limited company. We have access to the number 1 buy-to-let lenders in the market.