Advice on 2nd Property Purchase - is it still a good investment ?

realwildone

Everyone has to make up their own mind. I know people who lost a fortune on the stockmarket and are again playing in there.

If you want no risk then put your money in a savings account of sorts. Of course banks can crash too.

In the end it is all a risk but at least you can have a bit more control over brick and mortar than shares and panicky share dealers.

So far a few people in the media who have tried to talk the market down and it just has not happened.

I can only speak of my area here in the SE London. I have seen that the agents are very busy in the rental and just cannot get enough properties to rent out or sell. There are more renters and buyers than properties, hence the price is more up than the rest of the country. London is a different animal to the rest of the UK. A lot of the main companies are hiring like crazy and their staff need palces to live, quite a lot are used to more upmarket properties.

I had money in stocks, shares and funds and did not bring the return I had hoped for. If I had put the money in housing a few years ago it would have nearly doubled.

So I am taking my chance now to see how it goes.

Also if the market was so bad why are so many foreigners buying up anything from very cheap to properties worth millions? Because London is the metropolis of commerce and business and as mentioned before people have learned from the last crash and will not panic sell as they did then.

It was people like you who got caught out in the last crash and looks like the same again this time. You jumped into the market because you missed the greatest rise ever. Give me strength. You should be jumping out now. NOT IN

stphnstevey

realwildone wrote:

It was people like you who got caught out in the last crash and looks like the same again this time. You jumped into the market because you missed the greatest rise ever.

Actually, it's people like me and him that made a profit from the last crash and are enjoying a 'steady' rise. Its suckers like you who are renting from us.

realwildone wrote:

Give me strength. You should be jumping out now. NOT IN

How would you know? Unless your names 'Gypsy Lyn' and have a crystal ball!:rotfl:

FaTB

UK007BullDog wrote:

I had money in stocks, shares and funds and did not bring the return I had hoped for. If I had put the money in housing a few years ago it would have nearly doubled.

So I am taking my chance now to see how it goes.

So your going to make the same mistake again of jumping on a bandwagon that everybody else is just about to get off !!

Buy - High Sell - Low

But I suppose markets need people like you, for somebody to make money somebody has got to lose money.

Byrneand_2

Yes there is risk in all the investment decisions that you make - and equally you try to mitigate those risks by fixing interest rates/forex, researching deeply your investment area etc.

But if your young enough and have worked hard enough to be an a position where you are assured a high income, then why not take that extra risk because your tolerance to loss is greater. Yes in the short term (2-5 years) you may make be exposed to losses but given that house prices have historicallly grown at 4% (over a 35 year period) then if you are comfortable with taking on any loss and seeing it through as a long term investment then you should be fine. The leveraging effect exasurbates gains or losses, but a debt element is seen as a major positive in the majority of financial models. There's also the slight possibility (that is overlooked by many on this sight!) that house prices may continue to rise over a period of 10 years and you might make a strong profit.

Alternatively why not sit back, wait for the cycle to move on and buy at the most opportune moment (deciding when this is is a different topic). By that time though you may have kids, be considering retirement and not have that time to recupe any loss if that doesn't actually turn out to be the best time to buy.

If your 50, working on £25k then your tolerance to risk will be lower than someone who is 24, earning £45k and knows that there employable should anything happen, and will be more comfortable with an extra £500 a month mortgage should a void period occur - its only 3 meals out a month!

Essentially what many have said on this forum, if your banking everything on a btl investment then yes you might get stung, but equally if your savy, have security in other income etc then you'll probably be fine.

dunstonh

But if your young enough and have worked hard enough to be an a position where you are assured a high income, then why not take that extra risk because your tolerance to loss is greater. Yes in the short term (2-5 years) you may make be exposed to losses but given that house prices have historicallly grown at 4% (over a 35 year period) then if you are comfortable with taking on any loss and seeing it through as a long term investment then you should be fine.

Your example is fine. However, the greater risk comes from those that have mortgaged themselves upto the hilt based on current interest rates and borrowing on interest only basis. A few notches up on the interest rates and they will be in deep trouble.

Unlike an equity investment were you can leave the money there and ride through the bad times or even increase your exposure to stocks at the low point to capitalise, with a mortgaged buy to let you are stuck as it is draining money every month. Not only has that mortgage increased but your residential mortgage as well.

How many could afford a 25% increase on their residential mortgage let alone a BTL mortgage as well?

It isnt the experienced landlord who knows a deal or those with other investments looking for diversification within their holdings who should be giving it a miss. It is the people with no emergency fund, no savings or investments, no pension banking a ton of debt and monthly repayments that past performance is an indication of future returns.

A stockmarket crash hits your portfolio for a couple of years before you see a recovery again. A property price crash and/or interest rate rise can see you repossessed, made homeless and possibly bankrupt.

Would you buy an endowment now? No. Yet mortgage buy to lets have a lot in common with endowments. You pay monthly in the hope that the end value beats the redemption on the mortgage. Endowments paid out big surpluses for years. Everyone became complacent. Then looked what happened.

Byrneand_2

I totally agree with the above post.

UK007BullDog

When you invest in property you can mitigate the risk by fixing the mortgage for 2, 3, 5 or even 10 years. So even if it goes up one is OK. People have to do a research on the subject and not believe either pro or neg hype. In the end people have to take responsibility and make a decision.

Stockmarkets have no such control. The investor is at the mercy of the traders and their jittery fingers.

And as mentioned before if one does the research, studied the whole buying and selling process and goes in it with eyes wide open, then that person is aware of the risks.

ALL Investments are ultimately risks. Playing lottery for 30 years every saturday is also a risk and might give you the win or more likely it will not.

Also there are plenty of protection packages out there in case tennants dont pay, etc.

Anyway I can only speak of my area where i live and my contacts I have. A property I am eyeballing costs £200K, interest only mortgage is around £700, service charge and ground rent a month are around £150, rent I can get is £1250 per month. Lettings/sales agent has over 60 people on his books looking to rent and he has only 6 properties on his books for lettings. During the buying process, the lettings part will kick in so the minute the property is "mine" I have a tennant in it.

The other option is to buy in a very different area, 2 properties at £100K each getting about £500 rent per month. Having done my maths, calculating demand in the areas, property value increases etc. the one property deal is better, however I like to have my precious eggs in more than one basket.

I have seen a couple of lenders slashing their rates again after they went up last month. My gut feeling tells me that the BOE base rate will stay at 4.5% in August. Reading the reports from the last couple of months when they had their meetings only 1 person of 12 or 13 wanted to raise the rates, most wanted to stay the same and a few to lower it. That is my personal view, and by no means am I all knowing.