An article on MSN amused me.  Buy to let is dead because:

1. house prices have fallen
2. there are 80% less buy to let mortgages
3. repossessions for buy to let properties have doubled from 900 to 1800 per half year
4. Lenders require 130% rent coverage
5. Borrowing rates have gone up

Lets address each point in turn:

1. house price have fallen  
   yes they have, in some areas for some type of properties.  Overall, taking an average, average house prices have fallen.  However, the properties I choose to invest in are under £75,000 and usually under £50,000.  Nothing has really happened to the prices of these properties.  If anything they have risen slightly but these make little impact on the overall house price that is stated by the newspapers.  So in effect house prices are COMPLETELY irrelevant.  Another thing to note is that the fall in average house prices has happened in the short term and if you haven't been told this before property is a LONG term investment.

2. There are 80% less buy to let mortgages
   another true statement.  However that doesn't mean there is 80% less money available.  It just means the sexy products have disappeared (even though I keep on seeing them pop up like 4.85% buy to let rates - speak to my broker) but there is plenty of finance available.

3. repossessions for buy to let properties have doubled from 900 to 1800 per half year
   wow wee!  There were 900 repossessions for the first 6 months of 2007 which is basically nothing and there is 1800 for the first 6 months of 2008 which again is basically nothing.  This figure does not give me any cause for concern as you will always have people who either get in to trouble due to poor management or they are a victim of bad luck, poor health etc.  The stats of 1800 is what you would expect.

4. Lenders require 130% rent coverage
   if you are trying to buy a property that cannot cover 130% of the mortgage payment then what are you doing!  The 130% coverage is forcing novice landlords to do their sums.  All professional landlords invest in 130%+ rental coverage properties.

5. Borrowing rates have gone up
   they have gone up, but now they have come down.  So I am not sure what they are saying here.  One thing I know, arrangement fees have gone up.  I think this is because mortgage exit fees have gone down.  The good thing is you can add arrangement fees to the loan so it doesn't hurt too much.

So is buy to let dead?  Its certainly not dead.  Its just about to awake and spread like wildfire.  Hope you share this vision.

Ajay

Posted on: 25th Sep 2008