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A Boost in Buy to Let Property
RomansProperties
Posts: 191 Forumite
http://property.timesonline.co.uk/tol/life_and_style/property/investment/article5767344.ece
A boost in buy-to-let property
The banking crisis has investors putting their money in property again
Low interest rates have boosted the investment appeal of buy-to-let. Agents are reporting a renewed interest in the sector, on the basis that it looks tempting to withdraw money from the bank, where savings earn next to nothing, and invest it in property (see auction report on page 7).
About 75 per cent of agents reported a rental yield of 4 per cent or more in a recent survey by the Association of Residential Lettings Agents (ARLA), with the majority reporting between 4 and 5 per cent — a cut above the interest from many savings accounts. Ian Potter, operations manager at ARLA, says: “With interest rates at 1 per cent, our members are seeing investors tempted back into the buy-to-let market as rental yields offer a greater return than the banks. With the financial markets in crisis, it’s clear that bricks and mortar are a safer bet than stocks and shares.”
But Nick Blamford, managing director of the independent financial advisor Informed Choice, says that investors should be cautious. “Buy-to-let should be seen as a long-term investment. Less than five years and you will probably lose equity because of a fall in house prices. And if interest rates start to rise again, you may be paying more on your mortgage while bank savings make money again.”
Savers should shop around — a quick hunt on moneysupermarket.com found that short-term savers with around £50,000 could find deals with rates of up 3.5 per cent. Letting out a property could make more but that is before agency fees and maintenance costs. And what if the property sits empty?
While this is good news for the buytolet industry I would still not advise buying a property with a return as low as that. Investors need to be looking for 8%-10%
A boost in buy-to-let property
The banking crisis has investors putting their money in property again
Low interest rates have boosted the investment appeal of buy-to-let. Agents are reporting a renewed interest in the sector, on the basis that it looks tempting to withdraw money from the bank, where savings earn next to nothing, and invest it in property (see auction report on page 7).
About 75 per cent of agents reported a rental yield of 4 per cent or more in a recent survey by the Association of Residential Lettings Agents (ARLA), with the majority reporting between 4 and 5 per cent — a cut above the interest from many savings accounts. Ian Potter, operations manager at ARLA, says: “With interest rates at 1 per cent, our members are seeing investors tempted back into the buy-to-let market as rental yields offer a greater return than the banks. With the financial markets in crisis, it’s clear that bricks and mortar are a safer bet than stocks and shares.”
But Nick Blamford, managing director of the independent financial advisor Informed Choice, says that investors should be cautious. “Buy-to-let should be seen as a long-term investment. Less than five years and you will probably lose equity because of a fall in house prices. And if interest rates start to rise again, you may be paying more on your mortgage while bank savings make money again.”
Savers should shop around — a quick hunt on moneysupermarket.com found that short-term savers with around £50,000 could find deals with rates of up 3.5 per cent. Letting out a property could make more but that is before agency fees and maintenance costs. And what if the property sits empty?
While this is good news for the buytolet industry I would still not advise buying a property with a return as low as that. Investors need to be looking for 8%-10%
0
Comments
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Oooooh you're going to be in trouble for reporting that!!!
There's quite a few members on here who are twisted and bitter and they want everyone to stay in the gutter to keep them company!:D
They don't like the thought of people putting money into property, cos they know it's the BEST long term investment there is. They're jealous!:p0 -
Talking to a friend over the weekend - hes just picked up a 3 bed terrace property on the cheap and has managed to find tenants. Hes reckons he will make a 9% yield. not bad0
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Talking to a friend over the weekend - hes just picked up a 3 bed terrace property on the cheap and has managed to find tenants. Hes reckons he will make a 9% yield. not bad
There can always be worthwhile properties for BTL out there in any market.
Granted the numbers have been decreasing due to lower rental yield, but there are still some out there.
Add in the OP's point about investors looking for a better return than leaving their money in the bank and it can make sense:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Absolute stab in the dark, but I presume he would be getting circa £800 per month and paid circa £100,000.Talking to a friend over the weekend - hes just picked up a 3 bed terrace property on the cheap and has managed to find tenants. Hes reckons he will make a 9% yield. not bad
Which area is it in?:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
RomansProperties wrote: »http://property.timesonline.co.uk/tol/life_and_style/property/investment/article5767344.ece
A boost in buy-to-let property
The banking crisis has investors putting their money in property again
Low interest rates have boosted the investment appeal of buy-to-let. Agents are reporting a renewed interest in the sector, on the basis that it looks tempting to withdraw money from the bank, where savings earn next to nothing, and invest it in property (see auction report on page 7).
About 75 per cent of agents reported a rental yield of 4 per cent or more in a recent survey by the Association of Residential Lettings Agents (ARLA), with the majority reporting between 4 and 5 per cent — a cut above the interest from many savings accounts. Ian Potter, operations manager at ARLA, says: “With interest rates at 1 per cent, our members are seeing investors tempted back into the buy-to-let market as rental yields offer a greater return than the banks. With the financial markets in crisis, it’s clear that bricks and mortar are a safer bet than stocks and shares.”
But Nick Blamford, managing director of the independent financial advisor Informed Choice, says that investors should be cautious. “Buy-to-let should be seen as a long-term investment. Less than five years and you will probably lose equity because of a fall in house prices. And if interest rates start to rise again, you may be paying more on your mortgage while bank savings make money again.”
Savers should shop around — a quick hunt on moneysupermarket.com found that short-term savers with around £50,000 could find deals with rates of up 3.5 per cent. Letting out a property could make more but that is before agency fees and maintenance costs. And what if the property sits empty?
While this is good news for the buytolet industry I would still not advise buying a property with a return as low as that. Investors need to be looking for 8%-10%
Oh dear. It appears that the average BTL investor now expects interest rates to remain low for an extended period , much in the same way that house prices would rise for ever ( and even now recover quickly).
Repossessions in the last quarter for 2008 rose sharply for BTL borrowers as more tenants were unable to afford their rent. None of which bodes well for hitting the bottom.0 -
Thrugelmir wrote: »Oh dear. It appears that the average BTL investor now expects interest rates to remain low for an extended period , much in the same way that house prices would rise for ever ( and even now recover quickly).
Actually, a BTL investor would be looking at fixing the interest rate for a longer time at the moment, therefore it would be regardless what happens with interest rates, they would be calculating on the term of their fixed rate.
Just checked the CML websiteThrugelmir wrote: »Repossessions in the last quarter for 2008 rose sharply for BTL borrowers as more tenants were unable to afford their rent. None of which bodes well for hitting the bottom.
http://www.cml.org.uk/cml/media/press/2108- 5,000 fewer repossessions than forecast in 2008
- 40,000 repossessions in the year - 1 in 290 mortgages
- 10,400 repossessions in the fourth quarter - 1 in 1,100 mortgages
- 1 in 64 mortgages in arrears of 2.5% or more
- 1 in 53 mortgages in arrears of three months or more (inflated by lower interest rates)
- 75,000 repossessions forecast for 2009 remains unchanged.
You say reposessions rose sharply in the fourth quarter, but actually they fell, from 11,100 to 10,400
Also, nothing in ther report distinguishing the difference between BTL and OO mortgages. Where are you getting your stats from?:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Absolute stab in the dark, but I presume he would be getting circa £800 per month and paid circa £100,000.
Which area is it in?
Its in northampton. He purchased for about 73K (from a high of of about 140k) and will be letting out as three separate rooms although didn't say how much would be paying0 -
Also important to note from the CMLWhat’s wrong with the months in arrears measure?
To calculate the number of months in arrears, we simply divide the accumulated arrears by the current monthly payment. So, as interest rates fall, the same value of accumulated arrears represents a higher number of monthly payments. Because official interest rates have fallen so far and so fast, beginning 2008 at 5.5% and finishing the year at 2.0% (and now 1.0%), the effect over the course of 2008 (and going forward in 2009) is particularly pronounced.
For example, a borrower with a £100,000 interest-only mortgage a year ago might have been paying a rate of around 7.5% at the beginning of 2008, making their contractual monthly payment £625. But by the end of 2008, the same borrower might have seen their rate fall to 4.5%, with their contractual payment only £375.
If this borrower fell £1,500 behind on their mortgage, at the beginning of 2008 this would have been equal to 2.4 months arrears. But by the end of 2008, £1,500 would equate to 4 months arrears.
However, using the “percentage of balance” figure, the borrower would be 1.5% in arrears in either period.
Because there are many households with a small amount of arrears, and fewer households with large amounts of arrears, lower mortgage rates tend to inflate the reported number of arrears cases in most arrears bands.
Although this doesn’t make the number of months measure “wrong”, it is very important to be aware of the artificial impact - caused purely by this arithmetic effect - on the reported numbers during the recent period of sharply falling mortgage rates.
http://www.cml.org.uk/cml/filegrab/1Q42008explanatorynoteonCMLarrearsandpossessionsstatistics.doc?ref=6284:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Thrugelmir wrote: »Repossessions in the last quarter for 2008 rose sharply for BTL borrowers as more tenants were unable to afford their rent. None of which bodes well for hitting the bottom.
Some reposession stats for Q4
http://www.cml.org.uk/cml/media/press/2116
BTL Repossession in Q4 = 1,300
This equates to 0.11% of all BTL's and 12.5% of all properties reposessed
Also interesting to note that BTL lending shrank from 12.3% of all total lending in 2007 to 10.6% in 2008, meaning BTL's mortgages are being paid down at a faster rate than OO mortgages.
With these facts, its hard to understand why people state on here that BTL is in trouble when its only 10% of mortgages, the other 90% are OO mortgages:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Its in northampton. He purchased for about 73K (from a high of of about 140k) and will be letting out as three separate rooms although didn't say how much would be paying
Very nice, the property for a 9% RY would be taking in approx £550 per month.
Given a deposit of 15%, this would mean a loan of £62,000 equating at 6% at interest payments of £310 and C&I repayments of £405
At 6%, the tenants could pay off the mortgage in around 14 years:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0
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