I know this is a bit OT but I am about to exchange contracts on my first buy to let property in the next 3 weeks and im getting cold feet.
I have re-mortgaged my house to release the equity to pay for this its something I have always wanted to do.
Due to the turmoil in the housing and finance market I am beginning to question my judgment and timing Is anyone on this forum in this business that could offer advice.
In article , Phil Gardner scribeth thus
Look at it short term and run a mile!..
Look at it long term .. and yep, good as investment as any.
I reckon that the UK housing market will wobble quite a bit as its well over priced and has been that way for a long time.
And I suppose you have done your homework about the times when you don't have any tenants and allowed for maintenance costs etc...
Just make sure you vet your tenants properly ;-)
Yes, you may have always wanted to do it.
However, that's not a valid reason to invest, unless you can afford to lose (a fraction of the) money and walk away happy.
If you are relying on house prices continuing to increase to increase your profits in the long term, I would - at least in the UK - walk away now.
If you've got a property with established paying long-term tenants that you're buying, and can cope if the housing market stalls, or falls back a few percent, then it may not be unreasonable.
How much research have you done into the rental market in the area in question?
This is about as bad a time as any to go into BTL.
Encouraging just like the knowledgeable service you get at B&Q
He's right though. Read up about financial bubbles. They are a perfectly natural phenomenon, that has been around for thousands of years. We are currently in the middle of such a bubble, and you are about to buy just before it bursts.
Beware! That place is a support group for the dispossessed, not a place for rational analysis of the housing market. A considerable number of them sold up in 2003 and have been calling a crash everyday since. I'd put about as much credence on their opinions as I would on Foxtons.
PWC produce monthly roundups of the whole British Economy which are pretty comprehensive, and rather better informed. Latest one is here, see pp.22-26 on the housing market. Their "central" prediction is slow growth. Their worst-case (5% probability) scenario is not a disaster.
disaster.http://www.pwc.co.uk/pdf/uk_economic_download_nov07.pdfHouse prices aren't the only issue here though. You also have to consider the rental returns (which are suffereing) and whether your money would be better somewhere else.
MBQ
Fair point, although even small capital growth can more than make up for mediocre rental returns. Also I'd steer well clear of city centre
2 bed "luxury apartments". These are notoriously overpriced, you're competing with every other landlord in the block to get them let, and they've been falling in value while the rest of the market has boomed.
Sensible chap.
Madness.
Stick the money in a commodities specialist fund.
You will make more money with less hassle, and you can sell in a day if needs be.
I am not registered under the FSA to give financial advice so do not sue me if this turns sour on you ;-)
Historically a slightly worst investment than average actually.
A stock market tracker over the same period would have done better.
A situation in which rents do not cover mortgage repayments and the capital growth of the asset doesn't either is a disaster in MY books.
Remember the dotcom boom? and bust ? well then it was THE place to be. After it was the WORST place to be. Now its not a bad place to be.
Right now the best place to be is in emerging market and commodities funds. Averaging about 30% p.a.
Property funds - 4 of the top 5 WORST performing funds over last year have been property based = -30%.
Ive alway's wnated to own a racehorse, and a formula one team ;-)
However I would never expect either of them to be any more than very expensive hobbies...which perhaps fortunately, I can't afford anyway.
I never use 100 words when one will do ;-)
MBQ
Which is probably true. It is surprising therefore that if you go into a bank and ask to borrow 200k to buy a buy-to-let they won't bat an eyelid. Go in and ask to borrow 200k to invest in a FTSE100 tracker and you might get a different response.
The reason that people have made such a profit over the last ten years is not just the general rise in prices but the fact that a lot of that investment has been leveraged. But just as that is an advantage in a rising market is is a _big_ problem in a falling market.
In the long term it doesn't matter if property underperforms the stock market slightly. If three-quarters of your investment is coming from the bank your profit is increased four-fold.
Andrew
My only comment would be to say that the 'market' is lots of little markets and what matters is the outlook in yours.
And as the other Tony has says, think about repair costs, voids, letting costs and what happens if your tenant stops paying (it will take you months to get legal possession). The problem with this being your first is that if something goes wrong it is 100% of your BTL enterprise in trouble. If you get to (say) properties and one goes bad/is empty then it's much less destabilising.
Interesting! Do you have a link for this or any further information? If you're talking about residential property that is spectacular mismanagement. Whatever you think might happen over the next 12 months, to have lost 30% over the last 12 is bordering on criminal.
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