I do not know if I am stating the obvious here but can youplease try to avoid trackers that are greater than 3% above base.

 

Lets just say the rate offered is 5%.  Seems harmless does it not?  Well no actually.  It could be 4.5% above base tracker.  So when rates go back to normal (which theywill do at some point) you could end up paying over 10%!!!!!

 

Now if you bought a 10% yielding property, as much as ithurts to pay 10% borrowing costs, you can survive.  There will not be much margin for error orvoids or repairs but you can survive because you will simply lose your profitmargin.

 

If you buy at 5% yield then you will go out of business veryquickly especially if you bought quite a few. This is because you will go from breaking even to losing 5% of the aboutyou borrowed every year. i.e. if you bought £100k worth of 5% yielding propertyyou would lose £5k every year if rate hit 10%. That is at 100% occupancy levels with no repair costs factored in!

 

So if you see the headline rate of say 5% look further in toit.  If it is the lender's standardvariable rate (SVR) then you are ok.  If it is 4.5% above base avoid.  If it is 7% above base discounted by 2.5% for12 months then report them to the FSA for being complete rip offmerchants!  Believe me these sort of ripoff mortgages will start appearing.

 

I also read on SKY NEWSthat ARLA have reported that landlords are increasing their portfolios nowbecause rates are low and prices are low hence yields are high.

 

HELLO!  I think ARLAand Sky are a bit slow off the mark there. Okay, Okay they are just a news broadcaster so they will not have themost up to date property news but the good news is filtering through.  My only fear is the FTB (First Time Buyer)for obvious reasons.

 

Let us see how long this dip in property values last.  My hunch it could be over in 3 months.

 

Ajay

 

PS do not forget my seminars this forthcoming week:  Wednesday 24^th June for clients inCoventry and Saturday 27^thJune in Central London.

Posted on: 20th Jun 2009