new class divides are forming

I was just on Lloyds TSB site and even though the rates appear to be sensible at around 5.29% they are actually a bit of a rip off as it is 4.29% above base.

12 months ago even adverse buy to let was not even that high! If you were heavy adverse you would end up paying around 3.5% above base. Now if you have a squeaky clean credit file you will struggle to get under 3.5% base. How quickly a mortgage market can change!

So I can see a divide forming:

1. Those with buy to let mortgages pre 2008

2. Those without buy to let mortgages pre 2008

If you are in group 1 then you are doing fine. I am sure you are utilising your extra cashflow quite nicely.

If you are in group 2 I am sure you wish you were in group 1! Do not despair. If you think about it you are still paying the same rates we were back then - around 5%.

Some of the rates I paid for some buy to let properties in 2006/7 were in excess of 10%! I was buying real cheap properties which most standard lenders would not touch. I was getting +5% to LIBOR discounted by 2% hence paying +3% on LIBOR. The problem was it reverts back to +5% LIBOR which would equate to a 10% rate.

Now I say a problem but it was no big problem. The reason being I paid next to nothing for these properties. I am talking £20k+ so at a 10% rate the mortgage was only working out to be around £150. when you are getting a rent of £300 it does not matter.

So if you can get a borrowing rate of 5% and you are buying properties at 10% yield then you can expect to make 5% on whatever you buy. If you buy £100,000 worth of property then expect to make £5,000 per year. £1m expect £50,000 per year. £10m expect £500,000 per year!

£500,000 per year sounds nice. £10m to raise sounds like a lot of money. Well not really when you consider we are averaging 97.3% financing for our clients. Our clients are needing to find 2.7% on average to invest.

2.7% of £10m = £270,000. This could be the equity in your home, money in your bank, the value of your pension pot or simply an inheritance which is on its way.

To think the equity in your home could return you an inflation proof income of £500,000 per year would sound ridiculous wouldn't it? Well it can be a reality. I know so because we are doing it for our clients albeit in aggregate. i.e. the deals we have found if you were to add them all up we would have generated a very healthy income with very little money in.

If you want a chat about how we can help please get in contact.

Ajay

Posted on: 8th Mar 2009

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	Home Services Property News Free Resources Partners Contact Page you're viewing > Home Page > Property News > Ajay's Blog > new class divides are forming I was just on Lloyds TSB site and even though the rates appear to be sensible at around 5.29% they are actually a bit of a rip off as it is 4.29% above base. 12 months ago even adverse buy to let was not even that high! If you were heavy adverse you would end up paying around 3.5% above base. Now if you have a squeaky clean credit file you will struggle to get under 3.5% base. How quickly a mortgage market can change! So I can see a divide forming: 1. Those with buy to let mortgages pre 2008 2. Those without buy to let mortgages pre 2008 If you are in group 1 then you are doing fine. I am sure you are utilising your extra cashflow quite nicely. If you are in group 2 I am sure you wish you were in group 1! Do not despair. If you think about it you are still paying the same rates we were back then - around 5%. Some of the rates I paid for some buy to let properties in 2006/7 were in excess of 10%! I was buying real cheap properties which most standard lenders would not touch. I was getting +5% to LIBOR discounted by 2% hence paying +3% on LIBOR. The problem was it reverts back to +5% LIBOR which would equate to a 10% rate. Now I say a problem but it was no big problem. The reason being I paid next to nothing for these properties. I am talking £20k+ so at a 10% rate the mortgage was only working out to be around £150. when you are getting a rent of £300 it does not matter. So if you can get a borrowing rate of 5% and you are buying properties at 10% yield then you can expect to make 5% on whatever you buy. If you buy £100,000 worth of property then expect to make £5,000 per year. £1m expect £50,000 per year. £10m expect £500,000 per year! £500,000 per year sounds nice. £10m to raise sounds like a lot of money. Well not really when you consider we are averaging 97.3% financing for our clients. Our clients are needing to find 2.7% on average to invest. 2.7% of £10m = £270,000. This could be the equity in your home, money in your bank, the value of your pension pot or simply an inheritance which is on its way. To think the equity in your home could return you an inflation proof income of £500,000 per year would sound ridiculous wouldn't it? Well it can be a reality. I know so because we are doing it for our clients albeit in aggregate. i.e. the deals we have found if you were to add them all up we would have generated a very healthy income with very little money in. If you want a chat about how we can help please get in contact. Ajay Posted on: 8th Mar 2009 Bookmark: del.icio.us digg Furl Facebook Reddit Yahoo Spurl Smarking Simpy Stumbleupon Tell a friend Your name Friends email 2008 2009 January (16) February (7) March (9) FT reports on buy to let non-Rightmove estate agents and sub 25k propertie a nice deal came to me via text my month end reporting is in house prices to fall 55 per cent, so they say Some of my pages are getting viewed a lot new class divides are forming why are there so many grammatical errors bridge and remortgage is back April (4) May (4) June (3) July (8) August (7) September (9) October (8) November (3) December (4) 2010 2011

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