Will I overexpose myself to property if I expand my buy-to-let portfolio?

Q: My query is about investing in property. I am 29 and own a house with my boyfriend. I also own another property that I rent out. I have paid off my student loans and other debts and have built up about £30,000 in savings. With interest rates so paltry, I am considering what to do with the money to get better returns.

I don't know anything about playing the stockmarket and feel it might be a bit risky. I also had my fingers burned when I lost money invested in a fund, so would prefer not to make those type of investments. Instead, I am thinking about buying another buy-to-let property because I have experience of this.

Should I do that or would I be better off overpaying my existing mortgages or investing in another asset class? Since I already have two properties, I am worried about putting all my eggs in one basket.

David Hollingworth is a mortgage expert at London & Country Mortgages in Bath.

A: Previous experience of buy-to-let investing is certainly valuable. However, the buy-to-let mortgage market has changed since the credit crunch in 2008 and could look a little different to when you started letting your last home.

Today, most buy-to-let mortgages will require at least a 25% deposit and you will need to invest even more if you want the best interest rates. There will also be the usual costs associated with house purchases, such as survey costs, legal fees, mortgage fees and stamp duty. It also makes sense to keep some of your savings to cover any maintenance costs or gaps between tenancies.

Before you get to the specifics of any further property investment it does make sense to consider whether you are leaving yourself exposed entirely to the performance of property, with a bigger debt burden and little to fall back on in the event of a rainy day. It is not wise to put all your eggs in one basket so ask yourself if you have enough cash savings and a big enough pension provision before you start building a buy-to-let portfolio.

Alternatively, you could offset your savings against the mortgages on your existing properties. As you only pay interest on the difference between the mortgage and your savings, you are effectively earning the mortgage rate on your cash and it can also help reduce your mortgage debt more quickly. As there is no tax to pay, the effective rate of return will outweigh that of most comparable savings accounts and offset accounts, and also offer easy access to the savings.

Are you looking for an all-round guide to property investment? Get in-depth analysis of prospects at home and abroad, as well as tips on how and where to invest, in Interactive Investor's property special.