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Btl Article In Daily Telegraph 26 Aug 06

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Very large part of yesterday's personal finance section given over to this article on BTL. While most of it is very positive about what a wonderful investment this is, there are a few warning notes which might not have been there a year or two ago.

Daily Telegraph 26/08/06


Bricks and mortar may not be as safe as houses


Buy-to-let properties might appear tempting in a rocky stock market, but prospective investors should consider whether rental property is a safe bet or financial roulette.

There is certainly no lack of would-be landlords. Lenders advanced a record-breaking £17.5bn on more than 150,000 buy-to-let loans in the first half of this year, according to the Council of Mortgage Lenders (CML).

By borrowing, you can earn significantly greater returns from your deposit when property prices are rising; but face a greater risk of losing your money if prices fall.

Paul Ilott from independent financial advisers (IFAs) Bates Investment Services said: "For example, the return generated from a £30,000 deposit on a property worth £200,000 where the property subsequently increases in value by 10 per cent is £20,000. This is gain of 67 per cent based on the size of the original deposit.

"However, the gearing also exaggerates the downside, leading to a 67 per cent loss if the property value falls by 10 per cent, without even taking transaction costs into account."

While rising house prices are good news for existing buy-to-let investors, prospective landlords will find it more expensive to buy property. In response, lenders have changed the rules to permit higher borrowing.

Click on It's such a good investment to see a really scary accompanying case study. With this gem:

"We plan to rent it out for £750 a month and see it as a long-term retirement strategy. The rent won't cover all of the outgoings, so the flat will cost us between £50 and £100 a month to run."

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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