What’s the Bad News for Property Investors? – black leather bag
Posted: September 27, 2010 at 10:34 am
Knowing the good news for property investors is only half the story! Investing in property is a roller coaster ride and you need to avoid major and minor mistakes when investing in property or you could lose a lot of money rather than gain the riches property investment can bring!
Here are our top 10 ‘bad news’ stories for property investors to be aware of:-
1. The current property stock to purchase is low, so to find a great Below Market Value deal you need to search through 150 property deals, find 50 that work, and then find 10 that’ll take an offer. Of these you can usually black leather bag one!
2. Some areas and property types with oversupply in 2010 will FALL in value, so beware what you buy!
3. Finance is tough to find, you need (and will continue to need) 25% deposit and if buying to let, rental income 130% of the mortgage costs.
4. Fees are on the rise. For example, mortgage costs are up to 4% of the property’s value and fees in the thousands of pounds. Some insurance prices are going up due to the increased number of tenant arrears.
5. Mortgage rates for new properties are likely to remain at 5-7% long term. Some investors’ portfolios won’t stack up at these rates – will yours?
6. Rental income inflation usually lags behind actual inflation and if it doesn’t keep up with your rental cost inflation, the income you receive will be worth a lot less.
7. Average yields of 4-5% for buy to let is not enough to cover you for the ‘unexpected’ in the future eg interest rate rises, oversupply of rental properties. As a result, if income is your prime investment objective, then it’s essential to ensure your rental property delivers more than the average! Some investors look for 8%, others for 10% minimums.
8. Rent arrears are on the rise from tenants being made redundant, costing some landlords thousands of pounds!
9. Local Authority Housing allowance being paid directly to tenants is causing some poor landlords to lose out to tenants sending the money somewhere else, or just spending it on themselves!
10. Population changes in the next 15-20 years WILL change the demand for property stock in the future. An ageing population that lives outside of London are highly unlikely to be that interested in small one or two bed flats that are three or more floors up!
So property investors need to wade through troubled financial waters and also now not just buy something that looks like it stacks up now, but identify when and who you will sell onto, to make a profit in the future!
Thinking about Buy to Let or already a Buy to Let investor?
Don’t do anything without purchasing one of our Buying and Renting a Buy to Let Property Packs to ensure you avoid costly mistakes with your property investments. The pack is full of comprehensive information covering all aspects of buying and running a buy to let property. Each pack also comes with a FREE Which? Book – Renting and Letting or Property Investor’s Handbook, plus full access to the Designs on Property website, and all the expert and independent help you require from the UK’s leading property experts.
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