The rental income from a first investment property often tastes like more and the self investing in real estate is actually not rocket science. Many starting real estate investors choose to expand their real estate portfolio after purchasing their first investment property. But what steps can you take for this? How can you expand your real estate portfolio? For example, is it possible to expand a property portfolio at any time? There are various possibilities.
Building your portfolio starts with a plan
It is important to regularly look at your wishes and (financial) goals to assess whether your current portfolio of investment objects is still in line with this. Is everything going according to the chosen strategy and do you want to get more return from your money? Then expanding your real estate portfolio is a good idea. We explain to you what options there are and what steps you can take.
The definition of a real estate portfolio
A real estate portfolio is a name for a collection of investment properties. The quantity from which you refer to a real estate portfolio has not been determined by law and often differs per financing party. Most mortgage lenders speak of a portfolio when you own more than two investment properties. Do you currently have one investment property? Even then it is possible to easily expand. The purchase of a first investment property is in most cases the biggest challenge. To expand, you have the following options:
Refinancing current investment property
The first option to purchase a next investment property is to refinance your current investment property. If its market value has increased or if you have added value to the property, there is a chance that you have money tied up in the bricks. By refinancing the property you can ensure that you are going to withdraw your capital so that you can reinvest it. A well-known investment strategy is the so-called BRRRR method.
Step-by-step plan for refinancing investment property
Determine the value of your rented investment property. You can have this value in rented state determined by an appraiser. At Bliss, we are happy to initiate the valuation for you and match it with the desired financing. us with an estimate. You can refinance up to 90% of the market value. For example, if your home is valued at 300,000 euros, you can get a refinancing of up to 270,000 euros. It is important to keep an eye on certain key figures used, such as DSCR and ICR.
At that time, an amount of € 40,000 remains outstanding. The remainder of 20% must be financed from your own money.
Note: It is also possible that there is still a mortgage debt on the investment property. In this case, the debt is deducted from the value (for example: €200,000 – €20,000 mortgage debt = €180,000). We call the amount that remains after repayment of the residual debt the surplus value and you can use it for your own investment of a new buy investment property. This will also be a refinancing up to a maximum of 80% (for example: 80% of €180,000 = €144,000). You can supplement the rest with a rental mortgage.
Include equity in your own home
The second option is using the surplus value on your home. You can use the amount from the surplus value to invest in a new investment property. This is very similar to the method described above (the refinancing of an investment property). The difference is in the financing. In case of excess value, it is important that the amount that is released is high enough to buy a second home as an investment property. When you have enough equity for a full financing, you only need to increase the mortgage on your owner-occupied home. At Bliss we are happy to support you in mapping out the possibilities. Schedule a free calling appointment with one of our home equity experts.
Property financing of new purchase
If you do not have sufficient equity on your current home or existing investment property, you can choose to partially supplement it with savings or to finance it with a rental mortgage (also known as buy-to-let-mortgage or real estate financing). When investing in real estate, strategic partnerships often arise that purchase rented real estate or purchase real estate with the aim of renting out. This can be done using a joint venture structure, such as from a joint real estate CV.
Would you like more information about expanding your personal or business real estate portfolio? We are happy to support you in continuing to invest in real estate. Contact us today at 085-0470222.
