The UK housing market has always drawn plenty of interest from global buyers, but is it still worth building a property portfolio in the current climate?
There are a multitude of strategies people can employ to build wealth and secure their financial future – and every investment involves elements of risk as well as the potential for reward.
Property in the UK is renowned for being a lucrative asset class historically, with investors drawing returns through both monthly rental income and from profits made upon sale of the investment.
Building a property portfolio requires strong market knowledge, as well as the ability to adapt when the market changes. However, there are plenty of advantages for investors who create a strong property portfolio, including:
1. Housing market stability
One of the biggest draws of the UK housing market is its long-term stability and reliability, with house prices continuing to climb strongly over the years despite any short-term dips due to wider issues.
Both the sales market and the private rented sector are supported by strong demand and often a lack of supply, which maintains consistent price growth, making it ideal for long-term investors to profit from a property portfolio.
2. More profit on rental payments
Rental income can often be a crucial part of the return on investment, and this can be maximised by owning multiple properties. What’s more, the UK rental market is thriving and landlords are reaping stronger yields than ever in many top locations.
This means that for those with property portfolios, the increased cashflow can be used to offset other outgoings, such as borrowing and maintenance costs, as payments are received from numerous tenants and properties.
3. Minimised void periods
If you own a property portfolio, you are more likely to receive a constant income stream due to the reduction of void periods across your properties. Void periods can significantly impact the total return on investment, and is something most landlords want to avoid where possible.
Sometimes, void periods are inevitable, such as when a property needs maintenance or repair work to be carried out once tenants move out. But with your income spread across multiple properties, this period of vacancy will have a much smaller impact than if it was your sole rental income.
4. Tax benefits under limited companies
Although the tax system has changed in recent years to be less favourable towards landlords, operating your property portfolio via a limited company can be beneficial from a tax perspective. Landlords with multiple properties are also more likely to run their business through a company than as an individual.
Limited company investors can save money by paying corporation tax instead of income tax if they are a high-rate tax payer, which could mean greater savings if you are receiving a sizeable rental income. Limited companies can also claim mortgage interest relief, whereas individuals can only claim a flat 20% tax credit.
Further to this, scaling up your property portfolio can be easier via a limited company because you can reinvest your profits directly in the company, meaning you can avoid personal tax until you draw down dividends. For more on taxes, speak to an expert or see the government’s website.
5. Access to equity
If your property value increases, you can use your equity to take out further borrowing. By borrowing against your increased value, you may have the option of investing in other properties or releasing funds for other reasons.
This can be a useful way to access cash without having to sell one of your properties, and it can reduce the risk of having all your cash tied up in one asset.
6. Diversified assets
Having a diverse property portfolio makes a lot of business sense, and again can minimise your risk and make you a more agile investor. Having multiple properties – which may be different property types or across different locations – can ensure you benefit from a safety net if one property type or location underperforms.
This might involve diversifying across residential and commercial, or having properties in the high-growth areas in the North and the Midlands as well as any pre-existing investments in London or the South.
If you’re looking to build or grow your property portfolio, get in touch with BuyAssociation today to find out about our opportunities in top-performing locations across the UK.
