In recent years, more than 400,000 people have become landlords through buy to let, benefiting from great profits. Some experts say that it is too good to last, and the UK property market is finally set to get its reprisal. So should you stay away from buy to let opportunities, or should you take advantage of the current weakened property market to pick up cheap property?
State of the property market
According to recent figures buy to let gross profits rose over 16 per cent last year, a positive increase comparing to 13.5 per cent in 2006.
Due to interest rates hikes in the last six months of 2007, buy to let property price growth slowed down to 1.6 per cent.
Many experts warned against investing in buy to let property because property prices are likely to fall in the next two years or so. And that you should get ready to pick up some good property bargains then.
If you thinking of becoming a private landlord for the first time, you should be cautious because you need a high mortgage to cover current high property prices, and therefore you may not earn enough from the rental income to cover your mortgage monthly repayments.
Be cautious of new properties
The oversupply of newly-built properties has made finding new tenants difficult, buy to let investors should be cautious. Some property investors were forced to sell their properties under tens of thousands of their market value because they couldn’t find tenants. Some lenders have even cancelled buy to let mortgages on new properties.
Some experts say that buy to let landlords are now divided in 2 distinct classes. Amateurs who started investing recently, or got themselves financially stretched out, will not survive. Professional buy to let landlords benefit from their crunch and pick up bargain properties.
Evaluate your long term situation
The key to succeed in buy to let is to see the picture years ahead, if you want to make good money in buy to let make long term plans. Interest rates are expected to fall at some point but you need to make sure that you can still afford your monthly repayments if they rise in the future.
Take everything into consideration when doing your sums, including solicitor’s fees, mortgage arrangement, Stamp Duty, plus other expenses such as maintenance, or insurance.
And don’t forget to declare your income to the HM Revenue & Customs. You can claim tax relief most outgoing costs such as maintenance, advertising, and mortgage interest. But not on the capital borrowed.
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