'I own most of my street’ – buy-to-let investor, 26
This landlord’s portfolio of 11 properties yields 19pc – and he says he could cope if interest rates hit 9pc
Ryan Windsor saved the deposit for his first property while still at university Photo: David Rose
By Nicole Blackmore
Buy-to-let investors face shrinking profits over the coming years thanks to rising mortgage rates and higher taxation.
An interest rate rise is expected around the turn of the year, which is likely to push mortgage rates up from their current record lows, while changes announced in the Budget will see mortgage interest relief restricted to the basic rate of income tax – 20pc.
Many buy-to-let investors are now rethinking the viability of their business model. But one 26-year-old investor, who has built up a portfolio of 11 properties since the age of 18, is convinced that the sector has a promising future.
Ryan Windsor invested his £6,000 savings in his first buy-to-let property in Thetford, Norfolk in 2007. Over eight years he has built a property portfolio that he claims will continue to thrive, despite the challenging times ahead.
So how did he do it? Mr Windsor, a Cambridge graduate, said the key to his success was buying when prices were low and rigorously stress-testing his portfolio to protect against future shocks.
The Thetford local said he first became interested in property in 2006 when house prices in his area fell by up to 50pc.
“Repossessions were increasingly common and many people were put off buying property altogether, but I saw it as an opportunity to get a good deal,” he said.
He bought a repossessed three-bed terraced house on his street for £62,500, using the £6,000 he saved while studying and working part-time at Center Parcs as a 10pc deposit. He spent around £8,000 completely refurbishing the property, most of which came from a small inheritance.
'Over the last eight years I’ve had tenants from Portugal, Poland, Latvia and Lithuania,' Ryan Windsor said. 'There is a perception that migrants come to the UK and go on to benefits, but my tenants have all been really hard workers.' Picture: David Rose
There was a strong demand for rental properties amongst migrant families in the area, but they tended to be in poor condition.
Mr Windsor decided that he could build a business by offering a better standard of living. He started looking for similar properties in his area that were selling at a discount and slowly built up his portfolio.
“I now own most of my street,” Mr Windsor said. “I know the properties in the area are well-built and they are ideal for families.”
Unusually, Mr Windsor did not remortgage his existing properties in order to buy subsequent ones. He saved the required deposits while working so that he wasn’t heavily leveraged.
During the first couple of years the properties he bought were all repossessions and in need of complete refurbishments, which typically cost between £8,000 and £15,000.
He charges between £600 and £650 a month in rent. Over the past eight years he has had just one two-week void period and his average tenancy lasts four years.
He said he rarely has trouble with late or missed rental payments and only spends between five and 10 hours a week on landlord duties.
“Over the last eight years I’ve had tenants from Portugal, Poland, Latvia and Lithuania,” Mr Windsor said. “There is a perception that migrants come to the UK and go on to benefits, but my tenants have all been really hard workers who are drawn to the area because of the good employment opportunities, particularly in agriculture and factory work.”
Houses on his street are now worth up to £140,000, but the most he has paid is £110,000.
All 11 properties are still mortgaged, with 80pc on interest-only loans and 20pc on a capital repayment basis.
Mr Windsor said he protects himself against headwinds by continuously stress testing his business model.
He said he guards against rising mortgage rates by making sure he can still turn a profit at rates of up to 9pc.
The changes to mortgage interest relief will increase his tax bill, but as part of his stress testing process he assumes no relief is available at all, so said even 20pc is “a bonus”.
Mr Windsor calculates that his portfolio’s gross return – the rental income as a percentage of the cost of the properties – is 19pc.
“My original goal was to achieve financial freedom, which I’ve done,” he said. “Initially I wanted to build a buy-to-let empire with hundreds of properties, but I’ve realised that it’s better to have fewer properties and better cash flow.
“Landlords often get a bad name and while there will always be those who cram 20 people into a two-bed flat to maximise their profits, there are many who genuinely want to provide a good service to their community.”
Tips from a 26-year-old investor
• Get to know your target area well. Find out what type of properties are in demand, what type of tenants are attracted to the area and how much they can typically afford to pay.
• Familiarise yourself with local legislation. Councils often have their own rules about health and safety requirements in rental properties, for example, which are essential but can be costly, especially if you get them wrong.
• Build a good relationship with your local council. They are typically very happy to offer advice and work closely with landlords.
• Find a team of good, reliable tradesmen who can help you fix any maintenance issues quickly.