NEW PODCAST: I tried to sell a property at auction – this is what happened
NEW PODCAST: I tried to sell a property at auction – this is what happened
Weekly data-led tips, local hotspots, and what actually moves the market.
So you’ve bought your first investment property and survived the whole terrifying ordeal. The first month’s rent has landed in your account and you’re probably thinking: “That wasn’t so bad… when can I do it again?”
One property won’t change your life: you need to build a proper portfolio to make any real difference to your financial future. But before you start browsing Rightmove again, there are some important questions to answer: when is the right time to buy again, and how do you fund it?
You probably had a clear goal and strategy going into your first property purchase, so does owning one property move you closer to that goal? If your plan was to replace your salary with rental income, one property generating £300 monthly profit will have barely made a dent so you’ll need to move on to the next. But if you were aiming for long-term capital growth, you might want to see how your first investment performs before diving in again.
The key question to ask yourself is if your original timeline still makes sense. If you initially planned to buy one property every 18 months but your circumstances have changed, don’t be afraid to adjust.
This sounds obvious, but it’s worth being brutally honest about your finances. Consider:
Your savings: Have you rebuilt the deposit fund you depleted on Property #1? You’ll need money for the deposit, fees, and a buffer for unexpected costs.
Rental income: How much is your first property actually generating after all costs are paid? It’s tempting to count the gross rent, but we’re interested in what’s left after the mortgage, insurance, management fees, and that inevitable repair bill.
Your borrowing capacity: Lenders treat “portfolio landlords” (anyone with four or more mortgaged properties) differently, requiring more paperwork and stricter criteria. But now you have one property under your belt, it might open up new lender options who don’t consider first-timers. It’s worth another conversation with your broker at this point.
Yes, you can make money in property at any point in the cycle, but that doesn’t mean all times are equally good for buying. If we’re in the middle of a buying frenzy with properties selling for 20% over asking price, you might want to hold off. Conversely, if the market is quiet and you’re seeing price reductions, that could be your cue to speed things up.
Don’t try to time the market perfectly (nobody can), but do try to avoid the obvious traps.
Your first investment is your test case: Is it generating the profit you expected? Are you comfortable being a landlord? Have there been any nasty surprises that make you question whether you want to do this again?
If Property #1 is causing you grief, consider fixing those issues before buying another – there’s no point in accumulating problems.
For your first property, you probably saved up a deposit from your day job. But for subsequent properties, you’ll probably have more options – though they all require more effort or sophistication than your initial purchase.
The simplest method is the same as your first purchase: save up another deposit, though this time, you’ve got rental profit to add to your savings pot, which should speed things up.
If your first property generates £400 monthly profit and you can save £800 from your job, that rental income will get you to your next purchase 33% faster. Instead of relying solely on your salary to build up a deposit, you’re now accelerating the process with help from your existing investment.
This approach is slow, sure – but it’s also safe, predictable, and doesn’t require any clever financial engineering.
This is where property investment gets more sophisticated. The idea is to buy a property that needs work, improve it, and then refinance based on its new higher value, pulling out most or all of your original deposit to use again.
For example: buy a tired property for £80,000, spend £15,000 refurbishing it, and get it revalued at £120,000. Refinance at 75% loan-to-value (£90,000 mortgage), pay back your original £60,000 loan, and you’ve got £30,000 back – minus the £15,000 you spent on works, leaving you with £15,000 to put toward your next property.
This can work brilliantly, but it requires:
There’s also the six-month rule to consider: most lenders won’t refinance a property at a higher value until you’ve owned it for at least six months.
If you bought well and the market cooperates, your properties should increase in value over time. This creates equity you can access through refinancing, even without doing any work.
The problem with this approach is that you’re relying on factors outside your control. Property prices don’t rise in a nice straight line – they can remain flat for years, then surge, then fall back again – so basing your strategy on market growth is a bit like planning your career around winning the lottery.
That said, if you’re in no rush and can fund additional purchases through other means while you wait, this can be a useful bonus rather than your main strategy.
Some investors fund their buy-to-let portfolios by flipping properties: buy a wreck, renovate it, sell it for a profit, and then use that profit as a deposit on a rental property.
This works well if you have the skills and appetite for property development. The profits from trading can be substantial – easily enough to fund deposits on multiple buy-to-lets – but it’s also more work, more risk, and requires different skills from buy-to-let investing.
If you do have the skills, it’s a nice combination: development or flips for cashflow, which you then invest into buy-to-lets for long-term growth.
If you’re short on cash but long on knowledge, you might find investors willing to put up the money while you do the work. This can be structured in various ways: they might want a fixed return, a share of profits, or co-ownership of the property.
Joint ventures can work, but they’re not a magic solution for cash-strapped investors. Why would someone give you their money unless you’ve already proven you know what you’re doing? You’ll have to make your mistakes on your own dime first.
Getting a mortgage for your second property is usually easier than your first, assuming Property #1 is performing well. Lenders like to see that you’re a competent landlord who can generate rental income and manage properties responsibly.
However, you’ll want to work with a broker who understands portfolio lending, because different lenders have different appetites for multiple properties, and what works for one investor might not work for another.
Some lenders limit how many properties they’ll finance for one investor, so you might need to spread your borrowing across multiple lenders as your portfolio grows.
As you move beyond your first property, start thinking about risk at the portfolio level. Consider:
Geographic diversification: Do you want all your properties in the same town? If the local economy takes a hit, your entire portfolio could suffer.
Property types: Maybe mix houses and flats, or different tenant demographics, to spread your risk.
Cashflow: How will your overall cashflow look? It’s better to have one property making £400 monthly profit than two making £200 each because your fixed costs per property (insurance, safety certificates, etc.) won’t double.
Management: Can you realistically handle multiple properties? Either factor in agent fees or be honest about how much time you want to spend being a landlord.
There’s no perfect time to buy your second property, but there are definitely wrong times. Don’t buy if:
Do buy when:
Financing your second property will often be harder than your first because you’ve used some or all of your funds – but the upside is you’ll have learned a huge amount, and being a property investor has gone from an abstract goal to a reality.
If Property #1 taught you anything, it’s that you can handle the challenges of property ownership – so apply those lessons, be sensible about risk, and get on with building your portfolio.
Weekly data-led tips, local hotspots, and what actually moves the market.
