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Avoiding the get rich quick 'buy to let' trap

November to February saw a 10.7% increase in the value of ARLA ( Association of Residential Letting Agents) members property. A clever trick – as the average property value increase for the entire nation was 10% over the last year.
ARLA claim that tenant demand is exceeding supply – a quick look in any newspaper challenges that claim.
They also claim that their members are financing 70% of their purchases. This is only true if you do not include the secured loans borrowed on their existing portfolios to use as down payments on future purchases.
Another startling fact is the number of landlords who have substantial amounts borrowed on interest only mortgages.
“In for the long term” means something totally different in the buy-to-let market. It means that the landlord is willing to gamble 25 years of their life against the hope that their homes will increase in value (even when they are 25 years older) and that they will be able to sell them, repay their mortgages, and then bank the profit.
What will really happen is a stampede out of the market caused by novice landlords the first time they experience a dip in the cost of houses. Unfortunately, these landlords will learn a little too late that they bought their homes at artificially inflated prices, and the resell values will leave them petitioning for insolvency and mercy from the courts.

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Guest grumpy-old-man

taken from that link:

"In fact, most of the new landlords are now between 25 – 35"

yes, & I bet the majority are nearer 25 as well, no life experience & no property experience.

What makes people think that they can borrow huge sums of money, secured against their own property, & get rich quick........ah that would be the BoE, the banks, media, VI's, property prog's etc etc giving them all a nice helping hand.

It's going to an interesting period Dog, the next decade ? :ph34r:

Edited by grumpy-old-man

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taken from that link:

"In fact, most of the new landlords are now between 25 – 35"

yes, & I bet the majority are nearer 25 as well, no life experience & no property experience.

What makes people think that they can borrow huge sums of money, secured against their own property, & get rich quick........ah that would be the BoE, the banks, media, VI's, property prog's etc etc giving them all a nice helping hand.

It's going to an interesting period Dog, the next decade ? :ph34r:

As an age group, they are very young. Although there have always been young entepreneurs, they are relatively rare. This is more like a bunch of kids with a gambling habit.

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