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Whether you own one property or ten, there are a number of factors you need to consider if you want to diversify your property portfolio. Below, we’ve outlined what to bear in mind when planning your next property investment purchase.

Diversifying your property portfolio offers you plenty of benefits. For one, a mix of sectors and property types reduces the risk of financial void periods, but it also helps you to make the most of higher-yielding opportunities. Furthermore, owning a variety of different property types across different sectors allows you to navigate any unexpected economic circumstances more easily, allowing your portfolio to perform better amidst market volatility.

If you’re planning to diversify your portfolio with a new property investment, it’s important to make well-informed property investment decisions. Below, we’ve outlined five factors you must consider to help you achieve your property portfolio goals.


1. Should I invest in my own name or via a Limited Company?

The very first step is to decide whether you plan to invest personally or via a Limited Company structure. It’s important to decide this now with the help of a professional tax advisor and your broker, as incorporating your portfolio later on can be expensive and complex.

There’s no right or wrong answer when it comes to how you should invest, but there are benefits to each.

Investing in your own name typically means you have access to more competitive mortgage rate pricing and a wider range of lenders.

However, the main draw for many landlords to Limited Company borrowing is the potential tax benefits on offer. Limited Companies are liable for corporation tax instead of income tax, which can reduce your overall outgoings if you’re a higher-rate taxpayer. As a result, lenders stress-test Limited Company applications more generously, so you could borrow more per pound of rental income through this structure rather than in your own name.  

It's essential to speak to a professional tax advisor before making any property investment decisions. 


2. How to finance your portfolio diversification

Once you’ve decided whether you will invest in your own name or through a Limited Company, you now need to look at your finance options. Below are a few options that may help you with your next buy to let property investment. However, our team of experts can help you with all sectors, from commercial investments to development finance.

Buy to let mortgages

The most obvious route to go down is, of course, a buy to let mortgage to finance your next property investment. Many factors impact which rates and lenders you can access, such as your experience, income, deposit, current portfolio, and more.  It’s important to work with one of our expert brokers to help you navigate the market and find the best deal for you.

Typically, you can access the more competitive mortgage rates at the 75% loan-to-value (LTV) mark. You may also need to factor in additional costs, such as lender arrangement fees and any legal costs. For more on buy to let mortgages, click here.

Capital raising to fund new purchase

Remortgaging to release equity from your existing investment properties (or even your own home) to raise a deposit can be a great way to fund your next purchase.  

Bear in mind that if you’re not at the end of your current fixed-rate mortgage term, you may face an Early Repayment Charge from your lender. The nearer you are to the end of the term, the lower these fees typically are.

You’ll also have to factor in the possibility of having to remortgage your property onto a higher rate. One of our brokers will be able to review your current mortgage for you and calculate the most cost-effective plan for you.

Bridging finance

Depending on the property type and your property investment plans, bridging finance may be the perfect way to fund your portfolio diversification. Generally, bridging finance is used for auction purchases as a convenient type of short-term finance, but can also be used to prevent a chain break in a standard buy to let purchase, or to refurbish a property before letting out or selling on for a profit.

Despite being an increasingly popular type of finance, it is typically more expensive than standard buy to let mortgage rates. However, it’s important to remember that it is designed to be a short-term finance solution. To search the types of bridging rates you can access, use our FREE bridging calculator here.  


3. Consider the tax implications

As with any property investment decision, it’s important to consider all fees and charges involved, in particular, the tax implications that come with growing and diversifying your property portfolio. These costs can add up quickly, so it’s essential to discuss your plans with a professional tax advisor to answer any questions you may have.   

Stamp Duty Land Tax (SDLT)

In England and Northern Ireland, the Additional Property Surcharge of 3% applies to all residential purchase transactions of second homes or through Limited Companies. You can calculate how much Stamp Duty you need to pay on your next property purchase here.

Capital Gains Tax (CGT)

If you borrow in your own name, you’ll also need to factor in the cost of Capital Gains Tax. This will vary depending on the size of your portfolio, with the rates for CGT split into two bands for personally-owned property: 15% for basic rate taxpayers, and 28% for higher rate taxpayers.

Limited Company tax benefits

As mentioned above, there are a number of tax benefits to investing via a Limited Company that can help bring your overall mortgage costs down. It’s important to speak with a tax advisor first to see if this is right for your property investment plans.


4. Boosting rental yields

A key factor to successfully diversifying your property portfolio is to choose where and what you invest in carefully. Taking the time to research these factors will make all the difference to your investment returns.


Research which areas show the highest rates of rental growth, and where performs best for rental yields. Depending on the type of property you’re looking to invest in (more on this below), it may be better to focus on more urban locations, student areas, or properties near public transport to attract higher rental yields.

Property agencies such as Zoopla and Rightmove publish frequent rental market reports that highlight regional performance to help you with your search.  

Property types

The type of property you invest in will significantly impact your rental yields. Many experienced landlords will look to focus on HMOs and Multi-Unit properties to diversify their portfolios, as these properties are in high demand with tenants and generate competitive rental yields. Semi-commercial property and holiday lets are also fantastic opportunities to consider. Again, consider the location and types of tenants you will attract to ensure there is sufficient interest in the property.


5. Complete a Portfolio Review

A property portfolio review is a ‘health-check’ of your property investments. By completing a review, we can look at your current mortgage deals and see what types of diversification opportunities will benefit you. A portfolio review allows you to see whether you could be saving on your property finances and is an essential step in your diversification plans.

This could involve consolidating your overall borrowing with a portfolio loan or simply ensuring you secure new fixed-rate products in time to prevent you from reverting onto your lender’s SVR. By working with our brokers, you’ll leave feeling confident your property investments are performing well, and we may find you ways to save money sooner rather than later!

To learn more about accessing a FREE property portfolio review, click here.

In the meantime, if you would like to discuss your portfolio diversification plans, then do get in touch with our team of experts by calling 0345 345 6788 or submit an enquiry here.

Speak to one of our experts

If you have any questions regarding your mortgage application or want some advice, start an online chat with our specialist brokers or call us today on 0345 345 6788.

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