Why Invest in Buy to Let Property

So you’re thinking about getting your first buy to let property investment but you are confused. Some people are telling you how easy it is to make money from buy to let and others you know have lost their shirts making bets on flats they bought off plan that are now worth almost nothing because of the collapse in house prices. Others still are telling you this is an opportunity not to be missed but everywhere in the newspapers you are reading about banks refusing to lend, landlords who can’t remortgage and a glut of empty flats in cities such as Birmingham.

If you are confused don’t worry. You are not alone. A couple of years ago, when it seemed property prices could only go up, a lot of silly money was made in buy to let by people who really didn’t know what they were doing aided by estate agents, landlords and banks who were all willing to cut corners and turn a blind eye. Developers were happy to pull a fast one and falsely inflate the purchase price and then quietly discount it back by 20% so buyers could end up getting 100% mortgages and buy properties without deposits (even though the banks thought they were lending at 80% of loan to value). Estate agents were giving inflated estimates of what rentals might be achieved and buyers were foolishly buying two or three properties off plan without doing any homework or having the financial resources to even really support one property should they struggle to find tenants.

One developer who was building a block of apartments in Leeds proudly displayed a testimonial from a couple who said they were so impressed by seeing a presentation of the plans in London that they bought flats without ever having been to Leeds. Perhaps doing just a bit of homework, such as travelling to see the property they were buying, might have saved them a lot of heartache because the building was never finished.

The days of easy mortgages and buy to let madness are now well and truly over. In 2007 the market crashed and it took until the end of 2009 before property prices stopped falling and the buy to let mortgage market finally hit the bottom and banks started increasing mortgages.

If you are not just trying to make a quick buck, but are long term, patient investors who is willing to bide your time when buying and put in the effort to learn about this business you should be celebrating the two-year slump. Because before the bubble burst, the market was so frothy that all sorts of dodgy business was going on. Cautious and patient investors couldn’t get a foot in the door. During the market slump a lot of the shady operators and cowboys were washed out of the system. And that means that for patient and cautious investors, there is once again a real opportunity to make decent, sustainable investment returns over time by following sensible buy to let investment strategies.
There are, however, real pitfalls you need to be aware of before venturing into the buy to let property market. If you make bad choices you could end up with a flat that you can’t let, or with tenants who don’t pay their rent on time. You could end up buying a property that needs a fortune spent on it because the heating or electrics keep breaking down. Even more worrying is that you could end up with a property in negative equity with rents that don’t cover the mortgage, forcing you to top it up every month and putting you at risk of losing everything. So before even thinking of venturing into the world of property investment you need to really do your homework. You also need to be sure you have the financial resources to get started. There is no point stretching your financing to breaking point to the extent that you can’t keep paying the mortgage or other costs on your investment for a few months if things go wrong.

If you are just a gambler looking to buy a property from a developer and flip it quickly, then don’t waste your time here. You should probably stop reading right now. The buy to let property guide is not for you. I’ m sure there are plenty of developers and estate agents that will help you, but there won’t be any tips here for trying to make quick and easy money. This guide is aimed at people who are willing to make an investment for the medium to long term (15-20 years) and to make decent returns from capital appreciation (the rise in the value of their property) and rental yield from letting it out. This guide will cover topics such as:

This guide doesn’t promise any quick riches or easy money. But it will help you make better decisions before you make your first buy to let property investment.