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Buy To Let

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Buy-to-let, buy-to-let where shall we buy to let! Time and time again I get asked the same old question, where shall we buy to let?

Most landlords arrived as buy to let’ers by chance. They are opportunistic creatures who thrive on chance i.e. chance to make a million or two! Actually, more like three or four or £100,000,000…..as one of my landlords could claim. The property market has been very kind to the buy to let property investor; such person can buy a property at under market value, spend some money to improve its value and then refinance to market value. If that all sounds easy then it ain’t! I have spent many buy to let years helping landlords become multi millionaires and with surety I can make the following remarks:-

Not one of them has spent a penny on a ‘how to become a landlord seminar’

Not one of them has sat back and allowed property inflation make them rich

Not one of them started with enough cash to pay for a property outright

Not one of them has not made mistakes

Not one of them can accurately predict movements in house prices

Not one of them can accurately predict the movements of interest rates

And more importantly they are not one they are ALL DIFFERENT ones.

As we all know accidents do happen but whilst other writers may say a huge proportion of landlords got into buy to let by accident I would certainly have to change the word accident and replace it with the word luck. Accidents tend to be unlucky events but becoming a landlord is not an unlucky event, that is unless you think making a fortune from Property Investment is a bad thing?

I have read a lot of buy to let information about the type of landlord and carried out research on the traits of buy to let landlords through my company Landlord Mortgages and one thing certainly holds true:-

The majority of landlords did enter the buy to let market by luck, they were given a chance and they took it.

Building society lending doubles

Building society lending doubled in March, new figures from the Building Societies Association (BSA) show.

This year's March lending figures amounted to £5,468 million, which marks a rise of £1,270 million on the same figure last year.

Net advances were £1,848 million in March 2007, compared with £815 million in March 2006, while net receipts rose from £384 million in March 2006 to £741 million in March this year.

Meanwhile approvals were £5,741 million in March 2007 - up from £5,643 million in March 2006.

BSA director-general Adrian Coles said: "Yet again building societies saw record lending in March, with gross lending the highest ever recorded for that month. Approvals were also the highest for any March since 1988."

"In the first quarter of 2007, building societies recorded net lending of £4,381 million, more than double the £2,163m in the same period in 2006."

Coles added that the surge was largely a reflection of strong approvals (loans agreed but not yet made) seen in recent months.

He predicted that lending may now begin to cool, with further rate rises from the bank of England's monetary policy committee (MPC) possibly on the way.

The MPC voted to keep rates at the current 5.25 per cent level earlier this month.

Landlord Mortgages “Rate rises is expected to slow house price inflation to a more reasonable level, landlords are currently remortgaging their Buy To Let properties at record levels as the figures may not stack in a months time. Whilst the MPC voted to keep current rates at 5.25% it is our view that interest rates will rise by at least 0.25%. Further Interest Rate rises will be determined by new inflation reports and these can be very erratic from month to month.”

Nervous Landlords

Many residential landlords had cut the gearing in their portfolios to allow for interest rises ad high borrowing costs.

The average landlord’s gearing has fallen from 48% in 2002 to 38% in 2007. Those with three or less properties have cut gearing to 25%.

People see a 6% yield and repayment of 6% and assume landlords are running at a loss. This is not the case as landlords do not have 100% of debt and the average is 38%. They manage their portfolios well and their yield is still attractive.

More Building Demanded

One in ten people surveyed said they would like to see the Government insist that local authorities allow more building.