Why Buy To Let?

Good Afternoon Everyone. Today I thought I would talk about the Buy to Let market and in particular answer the following three questions:-

1. To buy or not to buy?
2. To sell or not to sell?
3. What are the risks?

A Buy to Let property is normally a UK property being purchased usually with the aid of a mortgage to be let at a monthly rent following completion to individuals or companies on a monthly rent.

If you listen to the media, be it television, radio or newspapers, you will be hearing that the property market is in free fall and prices are therefore dropping.

In the light of these predictions, it is important to understand why you may wish to purchase the property and what are the advantages.

The first point to recognise is that entering into the Buy to Let market cannot be short term and must be part of a long term investment strategy since as you can see, property values go down as well as up.

It is my considered view that entering into this market at this stage is in fact a sensible strategy provided that you have fully investigated the risks and, so far as is possible, planned against the property being empty for any period.

So is now the right time to buy? In my view, with a falling market and a part of a long term strategy, now is a very good time to buy, particularly as other Landlords who have entered into the market only very recently or have failed to plan, now need to offload their properties. These can usually be obtained more cheaply and sometimes with the benefit of a tenant still being in occupation.

As regards a sale, I think that in the present climate, it is better, unless you need to do so, to hold onto the property and continue to have it let out.

It may sound obvious but, with first time buyers not being able to get onto the ladder because of mortgage shortages, they will need to find properties to live in and this will be in the rental sector. As there will be a shortage of properties available in the rental sector and a lot of prospective tenants looking for property then the rental likely to be achieved in respect of the property will increase. If this is planned correctly using the right advisers then is may be possible to increase the rent every six months.

It is important that the credit checking, holding of the deposit and preparation of the tenancy agreement is prepared by a suitably qualified lawyer.

The risks associated with this type of transaction is that you may find that the property falls in value below the amount you have borrowed on mortgage and also that you may not be able to find a suitable tenant. Clearly, so long as you have given careful thought to your attitude to risk, then it is unlikely over a long period of time that you will lose your investment. If the values increase of course this leaves you free to raise additional capital to purchase other property but as in all property matters it is important that you do not over borrow.

I hope you have enjoyed reading my blog.

Reg

The Property Market

Afternoon. I have had a hectic day spent mostly discussing with banks and clients as to the effect of the Home Information Pack, Northern Rock and the credit crunch on the property market.

I have explained to them that in fact the information being provided in the media is unhelpful and misleading since it takes no account of the facts.

The imposition of HIPs onto sellers has undoubtedly created an unwillingness by UK property owners to put their houses on the market speculatively in the hope of being able to purchase another property. The reality regarding the fall in property prices is again designed to worry potential sellers since the increase in value they have never received and the consequent reduction in it's perceived value will have also affected the property that they may be proposing to purchase.

The reality regarding the mortgage situation is not quite so clear since different lenders are taking a different approach.

Tomorrow I will be speaking to those clients who are proposing to obtain property for letting purposes or those who already own property and may be questioning whether or not to sell.

I hope you have had a good day.

Reg Toy

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