is it wise to invest in buy to let now?

mlz1413

To KatP

I see your frustration on savings interest, a year and more ago you probably enjoyed earning 6%+ onsavings and now its less than half that and you need to lock away. But rates will rise so if you do invest in a B2L you may long term be getting a lower yield than staying with the banks.

If you do want to risk your capital investment for a tangible investment try to avoid flats there are so many currently for rent that it will limit your choice of tenants. If you can rent long term it maybe worth asking your local housing association what properties they are looking for, probably 3 bed +, as these can be let to them for 5 years - although this is not without its own problems, its food for thought.

Thrugelmir

mlz1413 wrote: »

I see your frustration on savings interest, a year and more ago you probably enjoyed earning 6%+ onsavings and now its less than half that and you need to lock away.

And was thought by many at the time. It was too good to be true...

theartfullodger

is it wise to invest in buy to let now?

FK....

Property as a source of income is like marriage and buying a house to live in: You really don't know if it was a good idea until 2 or 3 years after you did it...

And with a new conservative government very likely, look what the interest rates were last time they came in...

I can remember paying 15% for a mortgage (see
http://www.google.co.uk/url?sa=t&sou...KccZSrg9pioyKA
) - Bank of England base rate @ 17% 15th Nov 1979...15% Oct 1981... oh look, a new conservative (Thatcher..) government 4th May 1979 !!!, 12% July 1984, 14.875% Oct 1989 still a conservative government....still Thatcher...
.
- btw this was, IIRC, some months after I'd taken it out @ 8% and I was a "Good risk"!!
& think that today's borrowers don't understand that interests rates can & do shoot up: And as and when they do it can coincide (but may not..) with house prices dropping...

So, as long as you can weather the storm of a couple of years of not being able to sell/being in negative equity (if you need to bail out..) & you have the financial reserves to cope with the "Tenant from Hell" for 9 months who pays no rent whilst you pay the mortgage & the legal fees,,, and you have the financial reserves to cope with interest rates getting to (let's not be crazy, not 15%) say 10% & can still see a profit then, yup, go4it!!!

Cheers!

Lodger

Thrugelmir

theartfullodger wrote: »

FK....

Property as a source of income is like marriage and buying a house to live in: You really don't know if it was a good idea until 2 or 3 years after you did it...

And with a new conservative government very likely, look what the interest rates were last time they came in...

I can remember paying 15% for a mortgage (see
http://www.google.co.uk/url?sa=t&sou...KccZSrg9pioyKA
) - Bank of England base rate @ 17% 15th Nov 1979...15% Oct 1981... oh look, a new conservative (Thatcher..) government 4th May 1979 !!!, 12% July 1984, 14.875% Oct 1989 still a conservative government....still Thatcher...
.
- btw this was, IIRC, some months after I'd taken it out @ 8% and I was a "Good risk"!!
& think that today's borrowers don't understand that interests rates can & do shoot up: And as and when they do it can coincide (but may not..) with house prices dropping...

So, as long as you can weather the storm of a couple of years of not being able to sell/being in negative equity (if you need to bail out..) & you have the financial reserves to cope with the "Tenant from Hell" for 9 months who pays no rent whilst you pay the mortgage & the legal fees,,, and you have the financial reserves to cope with interest rates getting to (let's not be crazy, not 15%) say 10% & can still see a profit then, yup, go4it!!!

Cheers!

Lodger

Not sure what relevance whatever political party forms the next Government has on the decision. :rolleyes:

The property market is more complex than a vote in the ballot box.

Katie-Kat-Kins

mlz1413 wrote: »

To KatP

I see your frustration on savings interest, a year and more ago you probably enjoyed earning 6%+ onsavings and now its less than half that and you need to lock away. But rates will rise so if you do invest in a B2L you may long term be getting a lower yield than staying with the banks.

If you do want to risk your capital investment for a tangible investment try to avoid flats there are so many currently for rent that it will limit your choice of tenants. If you can rent long term it maybe worth asking your local housing association what properties they are looking for, probably 3 bed +, as these can be let to them for 5 years - although this is not without its own problems, its food for thought.

I was planning to avoid Flats like the plague, ours is not an area where flats are popular and yet quite a lot have been built by "property developers" in recent years. I was thinking may be a student property or something more aimed at the young professional ( a modern two bed house in a nice suburb with a small garden) but what you say about housing associations is very interesting.....

mlz1413

I looked into student house regulations about 4/5 yrs ago and be sitting down when you read it! Fire blankets as well as smoke alarms, desks as well as a dining room etc.

They are a good source of income as there wiill always be uni students, but ensure you calculate the voids ie summer hols, re-decorating most years, replacing furniture and having a low maintenace garden.

Not all students are awful but they can and do come in every type so ensure you get deposits and guarantors.

If you live in a nice area maybe look into corporate lets.

Katie-Kat-Kins

Thrugelmir wrote: »

Rates of return are positive even on deposit accounts taking into inflation into account currently.

If you want high returns then you have to accept high risk. Thats a personal choice. Pensions may not be exciting but at least benefit from a Government top up. That over the years compounds the return.

I'm not sure why you view property as being low risk. The myth of a one way bet is unproven. Every market moves in cycles of boom and bust.

1. I'm not planning to make any change to my pension strategy, this is in addition.

2. I appreciate that housing is not risk free, and that there are cycles of boom and bust, that is why I've been biding my time, no point buying when the market was as crazy as it has been in recent years. I figure that in about a year (when my current investment plan comes to an end) house prices compared to income should be more realistic and that will be a reasonable time to buy. I understand that the market could stagnate for years or drop further, if it does I'll sit tight, I won't be over extended as I only plan to get a 50-60% mortgage on a modest property and have a decent income from my main job and no mortgage on the property I live in. Long term the property market has had an upward trend, and I've bought a tangible thing rather than simply having money sitting in an account somewhere.

I appreciate that different investments have different levels of risk and I am not entirely risk averse. However if I don't buy something with this money the chances are I won't ever feel I want to touch the capital or the interest and it won't do me any good.

I'd be quite happy to look back in 10 years and realise that I might have got 2% more interest from the "right" deposit account, but instead have a house with a good chunk of equity that is making a small income (or at least paying for itself).

I'd also point out that while reasonably savvy I'm not one for checking rates or dealing with shares so I would tend to take the advice of a financial advisor and leave the money for whatever fixed term before reinvesting.

Thrugelmir

KatP wrote: »

1. I'm not planning to make any change to my pension strategy, this is in addition.

2. I appreciate that housing is not risk free, and that there are cycles of boom and bust, that is why I've been biding my time, no point buying when the market was as crazy as it has been in recent years. I figure that in about a year (when my current investment plan comes to an end) house prices compared to income should be more realistic and that will be a reasonable time to buy. I understand that the market could stagnate for years or drop further, if it does I'll sit tight, I won't be over extended as I only plan to get a 50-60% mortgage on a modest property and have a decent income from my main job and no mortgage on the property I live in. Long term the property market has had an upward trend, and I've bought a tangible thing rather than simply having money sitting in an account somewhere.

I appreciate that different investments have different levels of risk and I am not entirely risk averse. However if I don't buy something with this money the chances are I won't ever feel I want to touch the capital or the interest and it won't do me any good.

I'd be quite happy to look back in 10 years and realise that I might have got 2% more interest from the "right" deposit account, but instead have a house with a good chunk of equity that is making a small income (or at least paying for itself).

I'd also point out that while reasonably savvy I'm not one for checking rates or dealing with shares so I would tend to take the advice of a financial advisor and leave the money for whatever fixed term before reinvesting.

Good luck with your future plans. I wasn't trying to dissuade you from property investment in particular. But any form of leveraging up with debt increases risk. I don't think that the reasons for property's boom in the past 10 years is fully understood. In my mind there are still issues that will surface in the medium term that will cap prospects for growth.

Wouldn't rely on Financial Advisors either. Take the time and trouble to understand a market or investments yourself. Will save you a fortune in fees and bad investments.

colinbloke

mixed responses between don't bother with buy to let to go for it if you have plenty of spare cash for different, issues that could crop up.

a couple of questions then

When are property prices likely fall again if at all and if so what %

are stocks and shares and other investments likely to work out better than over paying my own mortgage.

i still feel that there could be something in buy to let, if i start with small property that i can cover mortgage if it is vacant (from own monthly salary), can cover most repairs up to £5,000 as for problem tennant i would use rental company management service that covers this sort of thing) if i think longer term investment this surely would be worth a punt (my jobs going nowhere at present) lots to think about??

Thrugelmir

colinbloke wrote: »

When are property prices likely fall again if at all and if so what %

are stocks and shares and other investments likely to work out better than over paying my own mortgage.

i still feel that there could be something in buy to let, if i start with small property that i can cover mortgage if it is vacant (from own monthly salary), can cover most repairs up to £5,000 as for problem tennant i would use rental company management service that covers this sort of thing) if i think longer term investment this surely would be worth a punt (my jobs going nowhere at present) lots to think about??

Property is a market. Prices will rise and fall. Though if we always have inflation ultimately they will reach new peaks. If I knew the answer as to the next signficant movement I wouldn't be telling you (said tongue in cheek).

So much has happened recently I wouldn't jump into anything to quickly. As there's much in the wider economy that needs addressing. Holding and saving cash earning 5% tax in an ISA free isn't a bad return. Whilst retaining the flexibility to see what developes.