The Brits can’t stop
talking about property. The hot topic of discussion at the posh dinner
parties of Fulbourn, Grantchester and Barton’s movers and shakers is the
subject of the Cambridge Property market, but in particular, buy to let. These
people are buying up buy to let properties quicker than an ace Monopoly player,
or so it would seem if you read the Sunday papers. So is the buy to let market
a sure fire way to make money? Is it something
everyone should be jumping into? The answer is Yes and No to all those
questions!
Firstly, the government gives tax breaks to landlords, as it
allows the mortgage interest payments on a buy to let property to be tax
deductible. Also, a landlord only has to flick through Rightmove or Zoopla,
pick any property at random and agree a price. Then, find a modest deposit of
25% (often by remortgaging their own home) which for an average Cambridge
terraced house, would mean finding £104,530 for the deposit (as the average Cambridge
terraced house is currently worth £418,121) and borrow the rest with a low
interest rate buy to let mortgage.
Finally, the landlord would rent out the property in a matter of hours
for top dollar and live happily ever after, with the rent then covering the
mortgage payments, with loads of money to spare and come retirement have a
portfolio of property that would have quadrupled in value in fifteen years.
Sounds wonderful – doesn’t it? Or does it?
Let us not forgot that the half of one per cent Bank of
England base rate is artificially low. The international money markets can be
fickle and if interest rates do rise quicker and higher than expected because
of some unforeseen global economic situation, that monthly profit will soon
turn into a loss as the mortgage will be more than the rent. Even though
tenants are staying longer in their rental property, tenants still come and go
and my guidance to landlords is they should allow for void periods, plus the maintenance
costs of a rental property and of course, agents fees... all things that eat
into that profit.
Interestingly, by my calculations, there are approximately 4,150
Cambridge landlords owing in excess of £777 million in mortgages on those Cambridge
buy to let properties. An impressive
amount when you consider Cambridge only has 0.389% of all the rental properties
in the Country. It really does come down to a number of important factors going
forward to ensure you are water tight for the future. A lot of my existing
landlords are fixing their mortgage rates. One told me that the Metro Bank are
currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years
(based on a 75% loan). I don’t give financial advice, so you must speak with a
qualified mortgage advisor, but that sounds very fair!
However, one thing I do know is that buy to let is a long
term investment, it’s a ten, fifteen, twenty year plan and property prices will
go down as well as up. You wouldn’t dream of investing in the stock market without
advice, so why invest in the Cambridge Property Market without advice? We give
bespoke detailed advice to our landlords to enable them to spot trends in the Cambridge
Property Market before others, enabling them to buy better properties at better
prices. For example, did you know that detached properties are selling for
around 30% lower than 12 months ago in Cambridge yet semis are selling for 21%
more (with every other type in between). This means we can advise on which
properties will go up in value better (or lose less if property prices drop),
we can also advise which have lower voids and which properties have higher
maintenance issues.
Information on the local property market and ability to
process it is the strongest asset we can give you. As Lois Horowitz, the famous
author says, ”Not having the information
you need when you need it leaves you wanting. Not knowing where to look for
that information leaves you powerless. In a society where information is king,
none of us can afford that”. One place to find information on the Cambridge
Property Market is the Cambridge
Property Blog, where you will find many articles just like this. http://cambridgeproperty.blogspot.co.uk/
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