Prospects For Buy To Let Property In The UK In 2010
Most UK buy-to-let investors will be glad that 2009 is now over, especially those who got into the market in 2008. By the middle of the year the market had become unrecognisable:
-the number of buy-to-let mortgage products had shrivelled from thousands to less than 100
-the maximum loan-to-value went from 85% to 75%
-the number of lenders reduced to a handful as many went bust or withdrew from the buy-to-let market
-lenders who remained in the market became very fussy indeed about who they would lend to
-property prices dropped significantly especially for new build apartments which the majority of recent investors had opted for, leaving remortgages to release equity almost impossible
-developers had all piled into the one and two bedroom new build apartment market, leading to over-supply, resulting in all lenders bar two or three deciding that they would no longer lend on such properties.
The immediate consequence of this was that many landlords got cold feet and bailed out of the market, those who did not often ran into cash-flow difficulties as the level of voids increased.
But what of 2010? In many ways the main issue in 2009 was that it was a year of adjustment with constantly moving goal posts which made it difficult for property investors to be confident of what would happen with any particular property which they decided to buy. Everything became unpredictable and deals took longer and longer to take through to completion. By the end of the year, and certainly in the last quarter, conditions had settled, even if far from satisfactory or conducive to a healthy buy-to-let sector. 2010 should therefore in some ways be easier in that investors will take on deals in full knowledge of the what they are up against with lenders and the mortgage products available. They will not be stuck in the middle of deals with conditions suddenly changing around them almost daily.
There are still challenges on the horizon however:
-lending is still restricted. The Council of Mortgage Lenders has announced that December lending was lower than November
-major buy-to-let lenders are tightening their lending criteria. Lenders with a 999 (perfect) credit score with the major ratings agencies are finding their mortgage applications turned down as lenders take a closer look at affordability, income and outgoings
-more and more lenders are asking to see proof of deposits, thus making it harder to complete on deals using creative financing methods
-national average property prices may not have bottomed out. Lenders are sitting on a massive stock of repossessed properties which they will have to sell at some point, which will increase supply and push prices down. It is the current lack of supply which is underpinning the clear but weak increases in property prices over the last few months.
How can prospective property investors stack the odds in their favour? I will deal with this in my next article, but in the meantime, get a copy of your credit report and ensure that it is factually correct and if you do not like what you see, get to work on improving it. I will give you some tips on how to do that in a subsequent article also.
Niall Mellors is a Chartered Accountant and experienced UK property investor and host of the Southampton Property Investors Network (Southampton PIN) event. He has also undertaken substantial personal development training to give him the mindset necessary to successfully invest in property. If you have property to sell in the UK then please visit his website at http://www.knightwoodproperties.co.uk to see if he can help.
Article Source: http://EzineArticles.com/?expert=Niall_Mellors
Thursday 25 February 2010
Monday 22 February 2010
Real Estate - Buy Low and Sell High
There are always stories of smart investors who take advantage of the downturns in real estate cycles, downturns in the stock markets, or overall downturns in the economy. While some people 'hunker down' or even panic during the difficult periods, others look for opportunities, or specifically wait for the opportunity cycle to come, as it has now.
While one of the mantras of investing is to 'Buy Low-Sell High', this doesn't always work out, does it? What we inevitably see is this: when something is 'hot' (like home rentals or condos recently), everyone rushes in to buy, but when it drops or freezes up, everyone panics and sells (or tries to sell). Often we 'Buy High - Sell Low', and that is a pity. Of course, when it comes to the realty world, an added culprit has been financing. Some investors over-financed, or when everything else in their portfolio and life crashed, they had trouble meeting debt service. It certainly seemed that in some cases, credit was too easy - just as now it is extremely difficult to obtain. A majority of lenders have not been open to working with borrowers who are in a jam, either.
When market conditions are in an opportunity state, as they are now, two points seem clear: cash is king and opportunities abound. Many investors are nervous about values or wonder if the economy will soften further. If they are suffering with under-performing real estate bought at the height of the market, they understandably become fearful of new acquisitions or frozen into inactivity. However, others are just nervous in general and fail to see the opportunities in front of them. There is no question that property can be picked up at deep discounts in many parts of the country, whether it be a home for rental or a commercial property. Thorough due diligence is needed, of course, and a basic analysis of cost of ownership should be weighed. It is a buyer's market and a buyer should negotiate hard, as they usually will have the upper hand. One who may acquire a property at a deep discount today with the mantra to hold the property until a solid recovery is in play, and then sell, may find success in their strategy. Timing is key.
For those investors holding under-performing property they acquired during the "up" market, the theme for this year is to "ride out the storm" and make it through whole. But for those investors who have cash, interest and a strategy, look at the great buying opportunities that exist today. The window of opportunity will not last forever. Always make sure to confer with your expert team when considering a real estate acquisition (CPA, attorney, real estate agent, title agent, spouse and lender, etc).
Kathy writes about commercial real estate and is a freelance author. She is President of a commercial real estate firm, Legacy Real Estate & Investments http://www.LegacyNNN.com specializing in triple net (NNN) investments, and she is author of "Effortless Cash flow: the ABCs of TICs (Tenant in Common Properties)". Kathy is working on a new real estate book for 2010.
Article Source: http://EzineArticles.com/?expert=Kathy_Heshelow
There are always stories of smart investors who take advantage of the downturns in real estate cycles, downturns in the stock markets, or overall downturns in the economy. While some people 'hunker down' or even panic during the difficult periods, others look for opportunities, or specifically wait for the opportunity cycle to come, as it has now.
While one of the mantras of investing is to 'Buy Low-Sell High', this doesn't always work out, does it? What we inevitably see is this: when something is 'hot' (like home rentals or condos recently), everyone rushes in to buy, but when it drops or freezes up, everyone panics and sells (or tries to sell). Often we 'Buy High - Sell Low', and that is a pity. Of course, when it comes to the realty world, an added culprit has been financing. Some investors over-financed, or when everything else in their portfolio and life crashed, they had trouble meeting debt service. It certainly seemed that in some cases, credit was too easy - just as now it is extremely difficult to obtain. A majority of lenders have not been open to working with borrowers who are in a jam, either.
When market conditions are in an opportunity state, as they are now, two points seem clear: cash is king and opportunities abound. Many investors are nervous about values or wonder if the economy will soften further. If they are suffering with under-performing real estate bought at the height of the market, they understandably become fearful of new acquisitions or frozen into inactivity. However, others are just nervous in general and fail to see the opportunities in front of them. There is no question that property can be picked up at deep discounts in many parts of the country, whether it be a home for rental or a commercial property. Thorough due diligence is needed, of course, and a basic analysis of cost of ownership should be weighed. It is a buyer's market and a buyer should negotiate hard, as they usually will have the upper hand. One who may acquire a property at a deep discount today with the mantra to hold the property until a solid recovery is in play, and then sell, may find success in their strategy. Timing is key.
For those investors holding under-performing property they acquired during the "up" market, the theme for this year is to "ride out the storm" and make it through whole. But for those investors who have cash, interest and a strategy, look at the great buying opportunities that exist today. The window of opportunity will not last forever. Always make sure to confer with your expert team when considering a real estate acquisition (CPA, attorney, real estate agent, title agent, spouse and lender, etc).
Kathy writes about commercial real estate and is a freelance author. She is President of a commercial real estate firm, Legacy Real Estate & Investments http://www.LegacyNNN.com specializing in triple net (NNN) investments, and she is author of "Effortless Cash flow: the ABCs of TICs (Tenant in Common Properties)". Kathy is working on a new real estate book for 2010.
Article Source: http://EzineArticles.com/?expert=Kathy_Heshelow
Property Prices Still Going Up
It is pretty strange at the moment, EVERYONE is reporting house price rises, all the latest data from the biggest names have reported consistent rises, however everyone is playing it down. "Do not read too much into the figures" "Double dip" "Unlikely to carry on increasing", it's as if the people reporting the stats just cannot believe them. You can imagine them double and triple checking the figures just to check that their data gathering tools have got it right !!
If you look back over time at the money made from property investment you will see that current yields are decent, this has not been the case for a long time. Previously a 6% yield was considered good, now you can get 8%+ yields and borrow at sub 5% rates. For those who like the really high yielding stuff and can get commercial funding you can get 12% yields and borrow at 3%. That is a clear margin of 9%, for every £1m invested expect to make £90k p.a.
No money down investing is possible, because you require big discounts from the vendor to do no money down investing and since it is a buyers market investors are buying up big time from those desperate to sell. When property does come back (and it will) whatever you bought will be dragged up in price.
It is pretty strange at the moment, EVERYONE is reporting house price rises, all the latest data from the biggest names have reported consistent rises, however everyone is playing it down. "Do not read too much into the figures" "Double dip" "Unlikely to carry on increasing", it's as if the people reporting the stats just cannot believe them. You can imagine them double and triple checking the figures just to check that their data gathering tools have got it right !!
If you look back over time at the money made from property investment you will see that current yields are decent, this has not been the case for a long time. Previously a 6% yield was considered good, now you can get 8%+ yields and borrow at sub 5% rates. For those who like the really high yielding stuff and can get commercial funding you can get 12% yields and borrow at 3%. That is a clear margin of 9%, for every £1m invested expect to make £90k p.a.
No money down investing is possible, because you require big discounts from the vendor to do no money down investing and since it is a buyers market investors are buying up big time from those desperate to sell. When property does come back (and it will) whatever you bought will be dragged up in price.
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