Following our last article looking at predictions for the rental market in 2025, we thought we’d put together some of our top tips for investors looking to continue expanding their portfolios in the coming months.
The past few years have certainly taught investors several critical lessons about resilience and adaptability that will serve to strengthen investor positions, and we have incorporated some of these into our tips below.
Cash Flow is King (Don’t Over-Leverage)
One of the golden rules of property investment remains unchanged: cash flow is king. While borrowing can enable significant investments, over-leveraging is a risky strategy, especially in challenging economic times.
In 2025, many lenders are expected to reduce interest rates slightly (hopefully), but this does not eliminate the need for caution.
Keeping a good buffer for unexpected costs such as maintenance, legal fees, non-payment of rent, or gaps in tenancy is essential to ensure stability.
Whilst some level of cash is important, the point is understandably that you don’t want to hold too much, as it can erode with inflation.
A good rule of thumb is to have reserves equal to 3–6 months’ mortgage costs and to bear in mind that around 1% of the property value should be set aside annually for maintenance.
Rent Reviews
This point is often overlooked. We came across an interesting post on LinkedIn recently that asked the question: ‘Is not raising rents really helpful to tenants?’
Certainly, it can be more expensive to secure new tenants than to retain existing ones, but neglecting rent increases can have serious, detrimental effects.
If regular (annual) rent reviews are not conducted, factors such as increased mortgage costs and unexpected maintenance can cause significant issues. Making a large rent increase to catch up is difficult and can be disruptive for tenants.
Additionally, tenants could find themselves stuck if they need to move due to the landlord regaining possession and market rents being out of their reach.
Our advice is to carry out annual rent reviews and keep rents for existing tenants just under the market rate. This way, tenants find the tenancy attractive, as it’s better for them to stay, but the rent remains manageable.
Look for the Deals
Smart investors know that the best returns often come from the best deals. With increased stamp duty, this is now even more important.
Our advice for 2025 is to focus strongly on properties that offer value, such as those requiring light refurbishment or those located in up-and-coming neighbourhoods.
It will be interesting to see if there’s increased interest over the coming year in off-market deals, auctions, and repossessed properties.
Think Long Term
We often emphasise that property investment is not a ‘get rich quick scheme’ but an excellent, stable way to build wealth over the long term. By this, we mean decades rather than years.
It’s been a challenging few years, with rapidly increasing house prices, house price drops, and increased legislation. However, the market has historically adapted, and we are confident it will continue to do so.
To illustrate this, a terraced house in Medway was worth £131k in October 2004 and today the value is £271k. That’s a 107% increase. Looking at the data, the drop since January 2023 will likely be remembered as a market fluctuation.
Bear in Mind the Green Agenda
The final point relates to the green agenda. We’re sure many of you are already familiar with the drive for rental properties to achieve EPC grade C by 2030, although no firm policy has been confirmed as yet.
We will be covering this in detail soon. While we don’t believe that EPC grade C will necessarily be enforced across the board, we do anticipate some degree of increased legislation requiring rental stock to improve.
If you are expanding your portfolio, it’s important to consider the potential impact of future upgrades (whatever they may be). For your existing investments, we recommend maintaining a cash buffer to accommodate any changes should legislation be passed quickly.
