We Brits can’t stop
talking about property. The hot topic of discussion is the
subject of the Cheltenham Property market, but in particular, buy to let. We hear of people who 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 surefire way to make money? Is
it something everyone should be jumping into? The answer is Yes and No to all those questions!
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 Cheltenham
terraced house, would mean finding £55,113 for the deposit (as the average Cheltenham
terraced house is currently worth £220,454) 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 3,290
Cheltenham landlords owing in excess of £616 million in mortgages on those Cheltenham
buy to let properties. An impressive
amount when you consider Cheltenham only has 0.308% 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 Cheltenham Property Market without advice?
Need some free advice ? Please call me on 01242 221188 or email me on neil.west@belvoir.co.uk
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