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► Why you should not Buy-to-Let
Buy-to-Let has been the largest growing mortgage sector for over 7 years, and owning property is seen as a higher yielding investment than pensions or shares in the long term.
When investors see diminishing returns from other investment routes and steadily rising property prices, and also have significant capital gains locked in their existing property, they see the opportunity for a fast profit.
This 'switching-in' of high worth purchasers has, without doubt, affected the First Time Buyer market which is now at its lowest number of new loans - ever. This has both an economic and human impact on a younger generation who are starting out in their careers.
Now many economists and commentators believe the Buy-to-Let market is reaching saturation and peaked in late 2001(based on total numbers of transactions), Since then “professional” buy-to-let investors have sold their investments on to capitalise the gains made.
However, with the 2008 credit crunch and mortgage unavailability this may change
► What to do instead
But there are 2 recent major changes that will sustain growth (that is growth not present price levels) in the residential market:-
1: Real Estate Investment Trusts (REITs) .
2: When house prices decline, the falls in prices will not be universal across the country and the first time buyer will re-enter the market as property prices soften - unlike previous times.
There is an economical price level where it becomes possible and advantageous for the first time buyer to return to the market. This will kick-in around the level of 4x salary level. It will also depend on the buyers perception of how much further the market will fall.
We have already (April 2008) seen falls of 10% in some high growth areas so we have seen a pick up of first time buyer activity in these locations..
► For cost information
With lower costs and risks the Joint Equity Scheme provides a higher return for your investment. By spreading your investment across several properties you will improve capital gains and lower risk.
► In this section:
The Joint Equity Scheme & Investing
The Joint Equity Scheme & Investing
► Buy-to-Let disadvantages
Buy-to-Let has some significant disadvantages as a method to invest in property:
1: High cost of administration
• Agents can charge up to 17.5% of the rent as a management fee
• Insurance costs are high as tenants are not always the most careful
• Maintenance is often more expensive being arranged by the agent
2: Void periods are getting longer
The average void is growing from 1 in 12 months to 1.5 in 12 - that's a 50% rise how long will they be by the end of 2010?
The average void is growing from 1 in 12 months to 1.5 in 12 -
3: Problem tenants
• Not paying rent
• Not vacating the property at the end of the lease period
• Damage
• Time and legal costs involved when seeking possession through the courts
4: You bear wear and tear costs and inconvenience
5: You bear maintenance costs
6: You bear additional costs if your property is not near you
The Joint Equity Scheme is for first-time buyers, home owners and property investors. This site is developed and maintained by Joint Equity ltd. ©Joint Equity (2006)
Joint Equity Ltd works with Mortgage Beaters Ltd to provide case studies & Illustrations to prospective Owner-Partners & Investor-Partners. Joint Equity Ltd does not carry out any regulated activities and so is not regulated by the FSA (Financial Services Authority). Joint Equity Ltd are introducer appointed representatives of Mortgage Beaters Ltd, which are authorised and regulated by the Financial Services Authority.
The content of this website is accurate to the best of our knowledge and for information only. We do not provide financial advice.
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