14th July 2023

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How to Invest in Multiple Properties

Owning multiple rental properties is the key to a profitable portfolio, and the old adage says that the first property pays for the next, which pays for the next, and so on.

But when it comes to buying multiple investment properties in a short space of time, you’re likely to come up against some barriers – so it’s important to be prepared.

By knowing the basics of multi-property investment, along with options like multi-family investing, you can grow your portfolio faster and sustainably, without running out of finance.

In this guide we’ll look at some of the options to invest in multiple properties at the same time, and some of the implications of this in terms of finance and property taxes.

Should you buy one or multiple properties together?

Buying one property is a good way to start your rental investment portfolio, but if you want to build your estate quickly, buying multiple properties together is the way to go.

As you buy more properties, the rental incomes should more than cover the buy-to-let mortgages, leaving you with a surplus cashflow to live off of.

Over the years, you build capital in all the properties you rent out and – providing there’s no dramatic crash in the housing market – you should expect to make a tidy profit if you ever decide to sell your estate.

How to start investing with more than one property

If you’ve already bought your first property, a good place to start is by ‘seasoning’ your first rental. Think of it like a proof of concept.

Seasoning means getting reliable tenants, collecting rents on time, dealing with any initial repairs that are required, and getting the property into a steady long-term state.

Armed with proof of all of this, you can go to a lender after 3-6 months and show that you are a reliable investment in your own right – improving the chances of them wanting to approve you for further buy-to-let mortgages.

How to finance a multi-property investment project

When it comes to buying multiple investment properties, you may be limited in terms of how much you can borrow at one time, even if the rental incomes are covering the monthly repayments.

Multi-family investing is one way to access more lending. We’ll look at this in more detail below, but by diversifying your rental income to multiple tenants instead of just one, you may be able to improve your chances of being approved for a loan.

As your property portfolio grows, you may find that owning multiple rental properties helps you to access further lending, as a track record in multi-property investment shows that you’re able to maintain properties – and tenants – in a profitable way.

Tax implications of owning multiple properties

Owning multiple properties comes with some tax implications, and in the UK the excess taxes associated with second homes have increased in recent years.

For example, when buying a second or subsequent home, you’ll be subject to a three percentage point surcharge on stamp duty land tax, which can add considerably to the total cost of buying a prime property.

You’ll also need to pay capital gains tax of between 18% and 28% on any profits made when you sell the property.

There’s a tax-free allowance for capital gains tax, but in 2023-24 this was cut from £12,300 to just £6,000 for individuals.

What is a multi-family property investment?

Multi-family property investment is any property occupied by multiple families, households, or independent tenants.

Examples include apartment blocks, flats, and large houses divided into multiple occupancies.

Because these households are all under one roof, you can cover your investment with a single mortgage – avoiding the issue of having multiple mortgages on separate dwellings all at once.

Multi-family investing is a good step towards owning multiple rental properties, because it can be easier (and cheaper) to qualify for a mortgage on this kind of property.

Final thoughts

Buying multiple investment properties is a great way to multiply your rental yields and build substantial capital as you pay off buy-to-let mortgages, but there are some limits on lending that you should consider in addition to the tax implications of owning more than one home.

With the help of a financial adviser and a good buying agent, you can make certain that you place your funds where they will achieve the best yields – unlocking the full value of multi-property investment to fund your future ambitions.

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