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What are the downsides of multiple buy-to-let?

This article is part of
Guide to multiple buy-to-let

What are the downsides of multiple buy-to-let?

With all this emphasis on the tax treatment of buy-to-let, it can be easy to overlook some of the other elements that need to be weighed up before deciding to invest in residential property.

Apart from the tax implications, there may be other reasons not to get into buy-to-let. Phil Morris, head of distribution at Gale and Phillipson, reckons: “Margins are thinning and the pros of investing in property are on the wane.”

Comments made earlier in the year by Ian Gorham, chief executive of Hargreaves Lansdown, were even more scathing of multiple buy-to-let. He told FTAdviser that it was “expensive and inconvenient” and did not compare favourably with investing in funds.


Paul Clampin, chief lending officer for Landbay, said the new tax rules may make “potential new landlords consider more carefully the underlying changing costs of making and running a buy-to-let investment”.

Indeed, it can be costly. Mr Gorham suggested that while £100,000 worth of shares might cost approximately £300 a year to manage, the cost of maintaining just one property could cost £3,000.

While such figures are difficult to verify, given the breadth and diversity of the residential market, potential investors do need to calculate all the potential outlay.

Mr Morris noted: “Managing properties has costs attached, whether in their own time or through employing others to deal with issues in your stead. Solicitors are needed for purchase and sale. Building surveyors are a wise investment but the list of costs goes on.”

Risk attitude

While Mr Gorham would recommend the diversification of stocks across a portfolio, for many multiple buy-to-let investors, diversification is not an option - all their money is tied up in property.

Should the worst happen to the property market, it is harder for investors to liquidate their holdings and make a profit.

Furthermore, investors who have five very similar types of property, rather than a spread, could be at risk of not having enough diversification in the property market.

John Phillips, group operations director of Spicerhaart and Just Mortgages, said: “The best way to hold a property portfolio is to have a spread across locations, such as one- and two-bed flats, converted and purpose-built, and two or three-bed properties close to train and tube stations, for example.”


There is also the issue of tenants - not all of them are desirable and could leave you out of pocket if you have to enforce an eviction. Although demand currently is high for rental properties, there is no guarantee this will be the case in the future.

Mr Morris added: “The point is simple enough: if your property is empty, with no tenant, you will receive no rent and therefore no income. This is especially important if you have a mortgage, as even if you have no tenant, the lender will expect to be paid.”