Charlotte Edwards is about to finalize her eleventh buy-to-let property acquisition in three years, asserting that business has never been more prosperous.

Her approach involves purchasing former council homes or Victorian terraced houses requiring renovation and significantly increasing their value. While three years ago she paused her property acquisitions due to overpricing, she now perceives the market as turning favorable.

“Currently, it’s an excellent time to expand my portfolio,” said Edwards, 40, from Oswestry, Shropshire. “When many landlords are exiting the market, buying opportunities arise.”

Defying the general trend of landlords selling more houses than buying in the past eight years, Edwards continues to invest. There was a 44% drop in homes available for rent in Britain from May 2016 to the same month in 2021, as per estate agents Hamptons.

Forecasts predict the market will lose another 35,000 privately rented homes this year. The Office for National Statistics reported an 8.7% increase in rents in England over a year, with April’s average reaching £1,301 per month.

Aneisha Beveridge, head of research at Hamptons, noted that tax and regulatory changes have driven some landlords out and deterred new investors.

Rising mortgage costs have exacerbated the situation. Current remortgaging landlords face an average fixed rate of 5.3% for buy-to-lets, up from 3.5% in 2019, according to Moneyfacts.

Monthly repayments on a 25-year £250,000 mortgage have risen to about £1,500 from £1,250, which translates to an extra £3,000 annually. Though many landlords use interest-only mortgages, the higher costs mean many fail affordability tests crucial for obtaining a mortgage.

However, Paragon Bank research reveals that 37% of portfolio landlords (with four or more properties) aim to increase their holdings this year, driven by strong rental demand or retirement income plans. We spoke with three investors for their success strategies.

‘I seek the ideal tenant’

Edwards started her buy-to-let journey in 2021. Following her brother and father’s deaths from cancer two years earlier, resulting in debt from her father’s treatment, she needed financial stability. She left a communications job to manage the family construction business but found herself without a steady income.

“With £50,000 savings but no wage, I had to find a way to generate regular income,” said Edwards, whose daughter, Florence, is nine. “I researched property investment strategies online and consulted other investors.”

Edwards employs the BRRR strategy: buy, refurbish, refinance, and rent out. She targets undervalued run-down properties, spending up to £25,000 on renovations before letting them out.

By remortgaging at the newfound higher value, Edwards releases equity, recovering most of her deposit. She aims to boost a property’s value by 20% post-refurbishment.

Focusing on Shropshire towns and nearby Wrexham, Edwards purchased three properties using bridging finance and two more via buy-to-let mortgages and equity released from other properties. Her construction business developed the remaining properties with development loans.

Her latest buy-to-let is a £200,000 three-bedroom Victorian mid-terrace in Shropshire, intended for conversion into a five-bedroom house of multiple occupancy (HMO), expected to earn £2,500 monthly rent.

“Most of my tenants are immigrants on five-year work visas, which ensures long-term tenancy,” she said.

“Many work for the NHS and have undergone extensive background checks, making them ideal tenants who are keen on building good credit records. Despite their reliability, they often face rental challenges due to landlord prejudices.”

Generating about £5,000 monthly profit, Edwards attributes her career shift to buy-to-let for transforming her life, claiming it shows other women how to achieve financial independence.

‘I purchase properties others avoid’

Thomas Balogun, 41, from Essex, focuses on properties with significant structural issues, such as subsidence or roof problems, often available at discounted auction prices. “I seek those with substantially lower market value and enhance them significantly,” he explained.

Balogun sources multiple building firm quotes to estimate costs and includes budget for extensions for added rental value. He calculates potential profitability to ensure the project covers mortgage costs.

Rising borrowing costs pose a challenge, with landlords finding rents insufficient to cover new mortgage rates. Balogun typically starts with bridging loans, transitioning to standard mortgages within nine months after renovations that increase property value. Shawbrook Bank’s Daryl Norkett confirms this as a common portfolio expansion tactic among landlords.

‘I established a limited company to maximize profits’

Recent tax changes have complicated profit-making for landlords. Previously, buy-to-let owners could offset all mortgage interest against rental income before tax; now they can claim only 20% tax relief on finance costs.

Owning property through a limited company remains advantageous due to corporation tax liability replacing income tax, allowing full mortgage interest deduction before tax calculation. This also means easier affordability checks and larger loans from lenders.

According to Paragon Bank, the percentage of property purchases through limited companies surged from 4% in 2014 to 79% by 2023, reaching 82% this year.

Davinder Sanghera, 36, entered the buy-to-let scene in 2016 while working as a trader. Transitioning to a full-time landlord after professional training, she set up a limited company to benefit from favorable tax rules.

“All my HMOs are under the limited company,” Sanghera said. “Thus, I can deduct full mortgage interest from rental income before tax. This isn’t possible when properties are personally owned.”

Sanghera acquires affordable two and three-bedroom terraced houses in the West Midlands, often adding rooms by extending ground floors or lofts for HMO configurations, renting to individual tenants.

Living in south Manchester with her partner Chris Ribeiro, 34, and their four-month-old daughter Inaya, Sanghera’s seven properties used to earn £1,000 to £1,500 monthly post-tax. After mortgage rate increases on two homes, earnings have dropped to about £800 monthly.

Despite this, she plans to expand her portfolio in future years when parenting responsibilities ease.