Strategies for Growth (Strategies 2 and 3 of 4)

In this final section of the 10 steps we are looking at how you can optimise your portfolio on an ongoing basis with 4 tools/strategies, being;?

1. Re-mortgage and pull out equity (cash).?
2. Using income from the properties to pay down/over pay mortgages.??
3. Re-mortgaging for a better interest rate, thus improving cash flow.??
4. Using income from the properties to purchase more (or deploy based on your goals).?

Last week we looked at re-mortgaging and pulling out cash, this week we will look at 2 and 3?

Managing Mortgages: Optimizing Cash Flow and Debt?

We've explored building your portfolio using interest-only mortgages. While the nominal value of the debt remains constant, inflation gradually reduces its real purchasing power. In simpler terms, a ￡50k mortgage today won't have the same ‘buying’ power 25 years later. Remember, inflation and time can be your allies in this regard.??

How else can you manage your mortgages and therefore cash-flow???

1. Use Rental Income:?

As your portfolio generates income, consider allocating some of it towards mortgage repayments. This decreases monthly payments, frees up cash flow, and accelerates the debt reduction cycle, further increasing your income – a virtuous cycle!??

2. Pull Out Equity (Cash) – as seen last week:?

As your properties gain equity, you can leverage it through re-mortgaging. Instead of buying more properties, use it to partially or fully pay off existing mortgages. This reduces debt while potentially increasing your overall income.??

Remember: Regardless of your choice (buying more vs. paying off), both options boost your income. One increases debt and asset value, while the other decreases debt. Choose based on your individual goals and risk tolerance.?

1. Gradual Portfolio Reduction:?

Nearing your ￡10,000 per month goal? Consider selling select properties to pay off mortgages on others. For example, a ￡200k property growing at 5% annually would be worth:?

• ￡325k in 10 years?

• ￡415k in 15 years?

After factoring in the original mortgage, you could potentially use the remaining value to pay off one or two other properties at year 10, or four by year 15. With each paid-off property, your income increases naturally due to reduced debt obligations.?

This is a long-term journey. Choose strategies that align with your risk tolerance, financial goals, and market conditions.??

Optimizing Rates: Re-mortgaging for Improved Cash Flow?

We have talked about pulling out ‘cash’ with a re-mortgage. Now let’s look at how re-mortgaging can help you secure lower interest rates, leading to increased cash flow and boosting your income potential.?

Pro Tip: Regularly review your mortgages with your trusted broker. Can you switch to a lower rate or adjust terms to reduce monthly payments and increase your income???

Mastering this strategy is key to compounding returns and growing your portfolio.??

For example, consider our earlier ￡200k property with a ￡140k interest-only mortgage at 4.5%. By re-mortgaging to 3.5%, you could free up over ￡115 per month in income. (See table below for details.)?

Table: Impact of Interest Rate Reduction?

This is GBP1,380 per annum. If you do the same on three properties? Over GBP4,000 per annum. Which adds up!??

Next week, we look at a breakdown of how your income builds up over time, and how you can deploy this based on your goals.??

We then have one more article and we are done.?