The Ride's Back On

[manterik]

http://www.thisismoney.co.uk/mortgages-and..._id=56&ct=5

Property investors return to buy-to-let

Richard Dyson, Financial Mail

18 July 2009

Guide | Deals | Calculate

Cash on deposit is earning next to nothing and the stock market is becalmed, with many companies unable to afford to pay dividends.

So where do you go if you want a reliable income? Believe it or not, the answer for some people is property. Yes, house prices are still falling and taxpayers continue to pick up the pieces of some of the big lenders that destroyed themselves in pursuit of property-related profits.

And yes, thousands of amateur buy-to-let landlords and distressed homeowners face repossession and bankruptcy.

But many of those currently eyeing property investments are cautious investors. They don't aim to make quick money from rising property prices, but just want a steady income - and they believe current investment opportunities are outstanding.

They include couples such as the Humes, who have both suffered badly in the recession. Lisa Hume, 36, better known under her own name Lisa Knights, was a presenter on Setanta.

The sports TV channel went into administration in June and Lisa, who was on maternity leave while she looked after five-week-old India, was formally told of her redundancy last week. Husband Nick, 41, was national performance director for water polo in the run-up to the 2012 Olympics, but cuts to sports funding triggered his resignation in March.

The couple, who live in Bristol and have another child, Noah, aged 22 months, have assets in the form of Lisa's redundancy, equity in their home and other savings.

And although they hope to work again in their respective fields, they want their assets to generate income - and are looking to property to provide it.

They have not invested in property before and Lisa says: 'I've always thought that what people were doing was mad. Buying a property in the hope that it would go up in value was an incredible risk. We would never do that.'

Instead, she and Nick are focusing on yield - the rental return they can expect to get relative to their outlay. At present, the rent that landlords can collect from well-chosen properties can exceed, per year, 10% of the prices they are having to pay for properties in this depressed market.

Nick and Lisa are not fussy about the type of property - period or modern, houses or flats. Instead, it is all about price. Lisa says: 'If the price is right, the type of property or tenant doesn't matter.'

The Humes have been scouting properties for months, attending auctions and researching the market online. Interest from similar buyers is on the rise, Lisa believes.

This tallies with data from Essential Information Group, the authoritative property auction analyst. EIG says that last month 71% of properties listed for auction sold at reserve price or above compared with only 54% in June last year. Demand may be growing, but prospective yields remain attractive.

A new internet service aimed at investors, propertyearth.net, amasses data from lenders, developers and agents to draw together only those properties that are not in a chain. These are primarily repossessions, but also include holiday homes, new homes that won't sell and properties being sold after the death of the owner. The site ranks properties by prospective yield.

The site shows scores of properties yielding more than ten per cent while the average yield of the 1,000 properties listed is 5.7%. EIG managing director David Sandeman says his data shows that yields on 'oven-ready' property for sale at auction - where tenants are in place - are between 8.5% and 9%. 'These high yields show there is daylight between income and likely outgoings,' he says. 'But landlords need that - owning property is expensive.'

As for Lisa and Nick, they have yet to buy. Their aim is to acquire two properties in the next year. 'We are cautious,' Lisa says. 'We want to be certain. Ultimately, we're putting our capital at risk.'

Opportunity knocks, if you have the cash

The mortgage drought means that investors with cash are king. Lenders will not advance more than 75% of the value of a property and the best rates are for loans of 60% of value or less. All carry large fees, typically two per cent of the loan but as much as 3.25%. Best rates include National Counties' five-year fix at 5.89% with a £2,495 fee, maximum 60% of value.

Property information: Trawling for potential bargains is surprisingly difficult. Propertyearth.net is the only website to specialise in listing chain-free properties - but its lists are not comprehensive.

Other web-based services offer investors details of repossessed properties for sale or at auction but may be unreliable, incomplete or both - and they come at a cost.

Auction analyst Essential Information Group (eigroup.co.uk) offers the opportunity to search upcoming auction lists freely, but not to view entire catalogues.

Most auctions list properties from all over the country, but the biggest auctions tend to be held in the South. New auctioneer REDC (auctiontoday.co.uk) specialises in repossessions, but so far its catalogues have been unappealing.

Auctioneers' details are listed at residentiallandlord.co.uk. Before putting repossessed homes to auction, lenders often use big estate agents, such as Connells, Countrywide, Spicerhaart or LSL, to market them locally.

Tax: From April last year, capital gains payable by higher-rate taxpayers on profits from investment properties fell from 24% to 18%. There is an array of other landlord tax perks, most valuable of which is the offsetting of expenses against rental income for tax purposes. Mortgage interest, property repairs (not improvements), service charges, ground rents, council tax, letting fees (for lets of a year or less) and your own costs of maintaining an office, travelling and employing an accountant are all allowable.

Edited July 19, 2009 by manterik

[shedfish]

is it a bit early in the morning for me, or are they basing their whole premise on a couple who might or might not buy 2 houses at some point this year or next?

QUICK. YOU'LL MISS THE BOAT

[@contradevian]

Ramping piece. Redundant? Then put your money into property and get a bank off the hook.

Really these "flogs" should be forced to put an "Advertisement" disclaimer at the top and an investment warning at the bottom.

Edited July 19, 2009 by HostPaul TAFKA Rover2000

[Bloo Loo]

well if you have cash you dont need, and are prepared to do a bit of work, take some risk, BTL is a no brainer. ALl you can lose is your own cash, and you might do better than a bank account. ( bear in mind cost of entry and exit in your calcs)

If you need to borrow any substantial amount to do it, BTL is a HUGE, levaraged risk where you could lose EVERYTHING. As many already have.

[Fully Detached]

They'll be fine. The bloke is an ex-director of water polo. What could go wrong?

[wealthy]

Money sitting in the bank doing nothing?

Fed up of a lowly 3-4% interest?

Then invest in property! Yes! You can lose 10% a year on your capital, run round after problem tenants and have to ensure the upkeep of the property! Not to mention stamp duty, legal costs, and of course the fact that should you need your money you won't be able to get at it in a hurry and will have to lose Even more money to get a quick sale!

Don't miss out on this fantastic deal, call 1-800-MUG and we'll sort you out a newbuild in leeds for only 80% more than anyone else is asking for!

[@contradevian]

Money sitting in the bank doing nothing?

Fed up of a lowly 3-4% interest?

Then invest in property! Yes! You can lose 10% a year on your capital, run round after problem tenants and have to ensure the upkeep of the property! Not to mention stamp duty, legal costs, and of course the fact that should you need your money you won't be able to get at it in a hurry and will have to lose Even more money to get a quick sale!

Don't miss out on this fantastic deal, call 1-800-MUG and we'll sort you out a newbuild in leeds for only 80% more than anyone else is asking for!

You forgot the "teaser" 1 year Rent Guarantee!

[Bruce Banner]

They've peen pushing this nonsense for the last six months, see my sig which dates back to January.

I am, and have been for two years, 100% cash and wake up every morning with a big smile on my face .

[futurepaul]

Are we actually still in the denial phase of this bust still or are we close to acceptance? Any thoughts

Personally the graviety of this sh!t has yet to hit sheepie two things I always come back to Util interest rates go up borrowers are sheltered from reality and until taxes/cuts are put into action everybody are sheltered from reality. Therefore it brings me back to we are still in the denial phase.

Am I right or wrong?

[manterik]

Ramping piece. Redundant? Then put your money into property and get a bank off the hook.

Really these "flogs" should be forced to put an "Advertisement" disclaimer at the top and an investment warning at the bottom.

Absolutely right, this is nothing more than blatant ramping. What it does not tell you ignoring to so-called yields are the risks of non-occupancy or tenants not paying, the cost to put new boilers in every 7 years or so and to re-decorate as well as anything that goes to the taxman.

10% return, they will be lucky to achieve the 4% they are getting in the bank (with minimum risk) and there is also the risk of prices going down further where they should be going based on the underlying economic indicators.

[manterik]

They've peen pushing this nonsense for the last six months, see my sig which dates back to January.

I am, and have been for two years, 100% cash and wake up every morning with a big smile on my face .

Very prescient Bruce.

Your sig hits the nail on the head.

[moneyfornothing]

They've peen pushing this nonsense for the last six months, see my sig which dates back to January.

I am, and have been for two years, 100% cash and wake up every morning with a big smile on my face .

Ditto Bruce ..how long you planning on staying in cash ? The only market indicator I am concentrating on is wage inflation .. all the rest is noise .

[Prof]

They'll be fine. The bloke is an ex-director of water polo. What could go wrong?

Nothing. He should SINK his money into property and he`s sure to make a MINT.

[loginandtonic]

how many such 'time to get back into property' stories ran last time? quite a few i'll wager. of course this time the govt's playing double or quits in a desp attempt at re-election, so i can understand bullishness when you've got zirp and qe yet no proper mention of massive national debt, no industry except City Casino to provide jobs, etc. the only industry is property ponzi, no wonder they've thrown the kitchen sink at it. what an embarrassment this country's so-called wealth-generation mechanism really is, the only good thing is our support for the developing countries around the globe, at least they get fed thanks to 1% i think it is of this reckless foolery we call an economy. i hope cameron's got some proper ideas when he comes in, this country needs a day job and fast.

[Bloo Loo]

how many such 'time to get back into property' stories ran last time? quite a few i'll wager. of course this time the govt's playing double or quits in a desp attempt at re-election, so i can understand bullishness when you've got zirp and qe yet no proper mention of massive national debt, no industry except City Casino to provide jobs, etc. the only industry is property ponzi, no wonder they've thrown the kitchen sink at it. what an embarrassment this country's so-called wealth-generation mechanism really is, the only good thing is our support for the developing countries around the globe, at least they get fed thanks to 1% i think it is of this reckless foolery we call an economy. i hope cameron's got some proper ideas when he comes in, this country needs a day job and fast.

http://www.housepricecrash.co.uk/wiki/Read...ast_time_around

[the flying pig]

that 'article' tells me that:

(1) one couple, nick and lisa, who may or may not exist, have not yet got into pwoperdee investment, but are thinking about it; and

(2) there are some suggestions about yields being higher than they were a couple of years ago [but obviously fairly low by historic standards] which of course they must be, given that prices have fallen - but of course to keep high yields we need one or both of low prices and high rents. i'm not seeing either at the moment.

Edited July 19, 2009 by the flying pig

[@contradevian]

that 'article' tells me that:

but of course to keep high yields we need one or both of low prices and high rents. i'm not seeing either at the moment.

Agreed. When you read these "flogs" rents are assumed to be free from gravity. In fact they are a lot softer than house prices as they are based on affordability rather than speculation.

[Giordano Bruno]

well if you have cash you dont need, and are prepared to do a bit of work, take some risk, BTL is a no brainer. ALl you can lose is your own cash, and you might do better than a bank account. ( bear in mind cost of entry and exit in your calcs)

If you need to borrow any substantial amount to do it, BTL is a HUGE, levaraged risk where you could lose EVERYTHING. As many already have.

I dislike this modern term 'no brainer', because even if a decision or situation is, or seems to be, very simple it is extremely foolish to decline to use your brain to think about what you are doing. One should always use ones brain, or expect catastrophic consequences.

It is also wrong, imo, to think that cash can be lost and it is not very important if it is not from a debt. Money is something that one can always have a use for, and the unexpected can always happen making the cash that one has a life saver.

[Scunnered]

The couple, who live in Bristol and have another child, Noah,...

They must be expecting a deluge.

[Mrs Bear]

Letter from property Q&A in yesterday's Telegraph:

"What do you think of companies that claim to help people find buy-to-lets at below market value? With such low savings rates I would like to invest in property but, having never done it before, wondered if this would be a way to minimise the risk. What exactly do these companies do?"

The 'guru'* advised avoiding them, but hardly in the strongest possible terms.

The fact that such a letter appeared at all probably indicates a mass of similar landing on guru's desk.

And this is just the Telegraph.

*She recommended instead taking the advice of sales and lettings agents, preferably under the same roof, to find suitable properties. There was absolutely no mention of doing one's own research.

[LiveAndLetBuy]

The article is just an advert for the website propertyearth.net.

It's a classic tactic used by corrupt journalists who have taken a back-hander: an attention seeking headline targeted at those who want to visit the website, followed by article based around rather tenuous anecdotal evidence, preferably using minor celebrities who are in the same situation as typical members of the target audience, and then half way down the product gets introduced as a brand-new tool that is unrivaled at whatever it does. Sign up quick and get ahead in the game!

[wealthy]

It is also wrong, imo, to think that cash can be lost and it is not very important if it is not from a debt. Money is something that one can always have a use for, and the unexpected can always happen making the cash that one has a life saver.

Agreed, people have really lost sight of the value of money, leveraging money it would take them years to earn without a care in the world, and claiming it's ok if the value drops becuase they'll just "hold on".

They should look to stockmarket advice. Cut the losers. These people are the equivalent of those turning a short term trade into an "investment"

[Bruce Banner]

Ditto Bruce ..how long you planning on staying in cash ? The only market indicator I am concentrating on is wage inflation .. all the rest is noise .

My guess is that I'll be in cash (currently 50% GBP 50% EUR all instant access) for another year or two, although I'm keeping a close eye on the situation.

The beauty of cash is that you can move quickly if necessary.

I'm not too worried about low interest rates for a couple of years, I just don't want to lose what I have so I'm not prepared to risk any kind of market, housing or stock, in these uncertain times.

[manterik]

The article is just an advert for the website propertyearth.net.

It's a classic tactic used by corrupt journalists who have taken a back-hander: an attention seeking headline targeted at those who want to visit the website, followed by article based around rather tenuous anecdotal evidence, preferably using minor celebrities who are in the same situation as typical members of the target audience, and then half way down the product gets introduced as a brand-new tool that is unrivaled at whatever it does. Sign up quick and get ahead in the game!

Yes, spot on, the editor probably received a PR release from them and printed it as an article. I would be surprised if the journalist did any more than cut n paste the original. Free advertising and ramping.

I am always cynical about this sort of article. remember the article a few weeks ago with that hag of a property developer who had pawned some jewelry to buy an Aston Martin. Same sort of thing.

[Bloo Loo]

I dislike this modern term 'no brainer', because even if a decision or situation is, or seems to be, very simple it is extremely foolish to decline to use your brain to think about what you are doing. One should always use ones brain, or expect catastrophic consequences.

It is also wrong, imo, to think that cash can be lost and it is not very important if it is not from a debt. Money is something that one can always have a use for, and the unexpected can always happen making the cash that one has a life saver.

its true, most humans need their brains to make a decision.

and many people can afford to lose cash....boat owners for example...or Mps claiming for second home.