The Brits can’t stop
talking about property. The hot topic of discussion at the posh dinner
parties of West Bergholt, Braiswick and Lexden’s movers and shakers is the
subject of the Colchester Property market, but in particular, buy to let. These
people are buying up buy to let properties quicker than an ace Monopoly player
.. or so it would seem if you read the Sunday papers. So is the buy to let
market a sure fire way to make money? Is
it something everyone should be jumping into? Is it a sure fire way to make
money? The answer is Yes and No to all those questions!
Firstly, the government gives tax breaks to landlords, as it
allows the mortgage interest payments on a buy to let property to be tax
deductible. Also, a landlord only has to flick through Rightmove or Zoopla,
pick any property at random and agree a price. Then, find a modest deposit of
25% (often by remortgaging their own home) which for an average Colchester
terraced house, would mean finding £48,349 for the deposit (as the average Colchester
terraced house is currently worth £193,398) and borrow the rest with a low
interest rate buy to let mortgage.
Finally, the landlord would rent out the property in a matter of hours
for top dollar and live happily ever after, with the rent then covering the
mortgage payments, with loads of money to spare and come retirement have a
portfolio of property that would have quadrupled in value in fifteen years.
Sounds wonderful – doesn’t it? Or does it???
Let us not forgot that the half of one per cent Bank of
England base rate is artificially low. The international money markets can be
fickle and if interest rates do rise quicker and higher than expected because
of some unforeseen global economic situation, that monthly profit will soon
turn into a loss as the mortgage will be more than the rent. Even though
tenants are staying longer in their rental property, tenants still come and go
and my guidance to landlords is they should allow for void periods, plus the maintenance
costs of a rental property and of course, agents fees. .. all things that eat
into that profit.
Interestingly, by my calculations, there are approximately 3,286
Colchester landlords owing in excess of £615 million in mortgages on those Colchester
buy to let properties. An impressive
amount when you consider Colchester only has 0.308% of all the rental
properties in the Country. It really does come down to a number of important
factors going forward to ensure you are water tight for the future. A lot of my
existing landlords are fixing their mortgage rates. One told me that the Metro
Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5
years (based on a 75% loan). I don’t give financial advice, so you must speak
with a qualified mortgage advisor.. but that sounds very fair!
However, one thing I do know is that buy to let is a long
term investment, it’s a ten, fifteen, twenty year plan and property prices will
go down as well as up. You wouldn’t dream of investing in the stock market
without advice, so why invest in the Colchester Property Market without advice?
We give bespoke detailed advice to our landlords to enable them to spot trends
in the Colchester Property Market before others, enabling them to buy better
properties at better prices. For example, did you know that flats are selling
for around 4% lower than 12 months ago in Colchester yet detached properties
are selling for 28% more (with every other type in between). This means we can
advise on which properties will go up in value better (or lose less if property
prices drop), we can also advise which have lower voids and which properties
have higher maintenance issues.
Information on the local property market and ability to
process it is the strongest asset we can give you. As Lois Horowitz, the famous
author says, ”Not having the information
you need when you need it leaves you wanting. Not knowing where to look for
that information leaves you powerless. In a society where information is king,
none of us can afford that”.
No comments:
Post a Comment