Bad Time to Buy Property as an Investment? By Lawrenson of LettingFocus

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A weird thing happened last year.
An old pal of mine from Merseyside bought a house right next door to the place where we used to live on the Wirral when I was just a small kid. This next door house was identical to our one.
He paid about half a million for it. My father paid £30,000 for ours back in 1971.
Not a bad increase in price over time I guess.

Don’t Compare Oranges with Bananas
But when comparing property prices over time don’t forget that properties need to be maintained which costs money.
And, of course, the quality of what’s in today’s properties is so much better than what one would have put up with in the 1970s.
Bleeding obvious I know - but often forgotten by many commentators.
So when comparing property prices today with what they were some years ago and saying “Gosh, how much things have gone up” we must always remember that we are not exactly comparing like with like because maintaining and improving property costs real money.

Inflationary Hedge
But all the same, those kind of figures really does show how property is a great inflationary hedge.
Money left in the stock market over the period 1971 - 2009 would have done pretty well too.
An investor friend of mine - Rochdale Andy - noted that he rather fancied gold at the moment but then added “Unfortunately I can’t leverage up to 70% buying gold.”
And nor can you borrow money to buy shares either.
Just go to your bank and see if they will loan you money to buy shares without any asset to back it and see how far you get.
And I imagine that, even if it were possible to borrow money to buy gold or shares, it would not normally be tax deductible either in the same way as investing in let property is .
And neither would gold produce a rental income.
These factors, for me mean that the right type of let property will beat shares most of the time.

Is It a Good Time to Buy Now?
It’s better to buy now than it was in 2007 right? House prices are down so it has to be better to buy now. Isn’t it?
Well, I bought 2 places in 2007 and where I have invested prices are down between 5 and 10% on 2 years ago.
Should I not have waited? Should I not have seen what Sir Fred and the other banking eejats were up to and held on through the credit crunch to buy now.
I disagree. At least not for one who needed mortgage financing to complete the purchase.
Why?
Well, back then I could get an 85% loan to value at a buy to let mortgage rate of just .69% above base rate FOR LIFE for a mortgage fee of about £500.
Now, the best loan to value is a measly 75%, the best buy to let mortgage rates are a whopping 4.5% above base for just 3 years followed by 2% above base for the rest of time.
And the fee is a whopping 2.5%, )which would have been £2,500 on that particular property.)
I’ve done the maths and because of the effect of the cost of money, it still looks like 2007 was a better time to buy. That said, I think 2009 will also prove good in the long run too partly because I think inflation will come roaring back within 2-3 years.
But I will look in more detail at why I think today is a good time to buy to let in a forthcoming blog.
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiased
property seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make £s at my one to one consulting service.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.
I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
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Real Evidence property prices have turned says LettingFocus.com

Cripes property prices seem to be turning up a bit in our part of London, at least for family type houses in average nick, which is not good news if you, like me were hoping that low prices would be around for a while.
To give you an example of this I had my beedy eyes on a nice two bed house for a first time buyer client in SE London back in January 2009 which was up for sale by a big landowning estate.
All it needed was £3K in basic redecoration. It would have been lettable right away at a rent of at least £900 per month or the guy could have lived in it himself.
Over Xmas, when all around was doom and gloom, it was actually marked down to £200K from £225K but this time around I was just too cheeky and went in too low at £185K. (I blame THE BOSS for the over-cheekiness!)
But the seller wasn’t budging and he put it on at a property auction in late January where the property fetched 195K, just over the £185K reserve price.
Since then the general economy and the state of the property market has started to look at lot rosier so the buyer put it back on the market in late April - in exactly the same condition - and has just sold it through an estate agent at £245K.
The investor probably paid cash at the property auction which will give him a profit of at least £40K after costs and an allowance for the opportunity cost of his own money.
So good luck to that property investor and well done to him.

PROPERTY AUCTIONS – WHY I AM NOT THEIR BIGGEST FAN
Now I have to say that I am not the biggest fan of buying property at auction and this is usually because… 1) Most times I am not a cash buyer and 2) Most of the property I see coming up at auction is rarely freehold property in anything like a decent condition. (I only buy leasehold flats that are self contained, in good condition and with a good management company where the directors are also the leaseholders – these can be pretty rare especially at auction.)
Property auctions always have lots of run down flats with poor management and duff leases. Where freeholds are for sale they are usually “building projects” (which I don’t have the time for right now.)

IF YOU NEED A MORTGAGE YOU ARE AT A DISADVANTGE AT A PROPERTY AUCTION
However, that property (the one that sold at auction at which sold at 195K) was unusual because it was a freehold house that needed not much doing to it.
Trouble is I didn’t want to chuck half a grand on a banks’ mortgage valuation just to be out bid at the auction.
And that is the trouble with auctions because at a property auction it is much better if you are a cash buyer.
So, I lost out on a chance to make £40K (or if it has been me buying, to get a great rental yield and a super investment)
Never mind, it all ended OK for me.
I went on to buy a similar property just down the road in better condition via my old trusted estate agency route for about the same money - £203K – so honours even on that one.
If you see the potential in flats or building projects and you want to go down the auction route and buy property this way take a look at my article Property Auctions.

WHAT DOES YOUR CREDIT FILE SAY ABOUT YOU?
Apparently, record numbers of people are checking their credit files to find out exactly what their credit record file says about them.
No doubt, the prompt for this is the fact they are all of a sudden being turned down for credit by our newly tight fisted banks and building societies.
Read my article; Checking Your Credit Record for more on how to check your file.

HOUSE PRICES
Finally, on the subject of house prices again, it always amuses me how when commentators talk about this it really gets people incredibly worked up.
Even more worked up than a bunch of guys discussing the England football team. Ok, well not quite that bad.
You can see this from all the vitriolic comments the big papers get in their online edition whenever the subject of the direction of house prices comes up.
Well, as you know, I have stated my colours firmly to the mast.
I think prices of family houses in the range £200k – 600K in London and the South East and many other parts of England and Wales have reached the bottom or near enough.
(Of course another Fred Goodwin type cock up or a flu pandemic will put the tin hat on any increase in prices, but these things are impossible to predict and if you don’t like risk you should stick with National Savings index linked certificates instead of property!)
In my work as a Property Finder I am certainly getting a lot of work right now from people who need help buying in the right areas. And that is a sure sign that people think property prices are going up.

LANDLORDS SUFFFERING SAY THE MEDIA
Mmm, I’m not so sure about that one.
Even if rents were down 20% on the year (which they aren’t for the type of property I buy), as most landlords existing mortgages are down about 50% following big cuts in interest rates, unless I’m “Mr. Dim at Maths” that surely means more profit for landlords?
Unless you have to sell now of course and therefore cop a potential capital loss. However most landlords are in it for the long term so won’t be uduly worried by rents that are down a bit.

AM I RIGHT YET RAY?
About 3 years ago I predicted that the proportion of let property could hit 25% by 2025 (unless the regulatory and tax environment facing landlords changed significantly). A leading commentator said I was naive. Well Ray, as the proportion of property that is let continues to increase rapidly to almost 13%, maybe you might still owe me a drink come 2025.

DON’T SHOOT THE PRESIDENT
I don’t normally do politics but Obama is such a breath of fresh air after the previous incumbent especially on foreign policy that I think some credit for the economic recovery must be attributed to him.
Partly, this must be down to the fact that his words, if translated into action, will certainly make the world a much fairer and safer place for us all. I just hope that some nut case “No Surrender” settler in Israel hasn’t got the poor man in his sights.
More on politics... will someone please get rid of that awful BBC political correspondent -the chappie with the glasses. You're not the news, Mister!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on renting out property because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier.
Find out about some great deals we have arranged at our Property Affiliate page.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Commentators don't understand the new paradigm on house prices says LettingFocus.com

I do think that some property market commentators are over fixated on first time buyers’ chances of getting mortgages as the lead driver of the future direction of house prices.
It matters, yes, and so does the ratio of earnings to house prices but it does not matter as much as it did before
For quite a long time now I have said that in the future, the new driver of activity will be either professional investors or wealthy parents with spare cash to pass on to their kids.
Don’t forget that over 40% of people have no mortgage so don’t give a stuff about mortgage rates and if they are not buying for themselves they will be giving their lucky offspring at least some of the money for a deposit and for the hefty mortgage fees which are now the norm.
Hard nosed property investors and rich parents of first time buyers are two key groups with the money to buy property and many commentators should wake up and realise the paradigm has shifted.
They should stop looking only at the standard measure of the ratio between a young person’s earnings and house prices or the affordability of mortgage interest payments but look instead at the stock of wealth that first time buyer’s parents and experienced property investors have.
I think it was the think tank, "The Future Foundation" who said that property was becoming more "dynastic" in nature.
I agree and about four years ago I wrote a press release suggesting that because of these and other factors, the proportion of property in the UK that is privately rented (then about 9%) could hit a third within 20 years.
Well, today I expect the budget may well give a boost to more private rented accommodation so I think my predictions could yet prove correct as more people either choose or are forced to stay in private rented accommodation.
It is sad to say - and a real shame for would be first time buyers- but if your parents are not rich your chance of getting on the housing ladder these days and in the future will be a whole bunch harder than it was in the past.
Maggie Thatcher gave us hope that we could all be home owners if we saved a little bit and worked hard. This hope is slowly being dashed.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investing Book.
The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing and capital gains taxes.
I’m an expert property writer and property speaker - and I run the well known property letting blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting and consulting to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we offer independent unbiased property investment advice because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
On the contrary, we are often asked to evaluate other property investments.
Find out about some great deals we have arranged at our Landlords Links page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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House Prices and Rental Yields by David Lawrenson of LettingFocus.com

Come to Our Next Evening Property Event in London Evening
Good information on what rents are doing - whether they are down or up – can be quite hard to find.
For quite a while I quoted data on rents and rental yields from Paragon Mortgages but they stopped reporting on this some time last year, possibly because the statistical significance of their data became somewhat lacking.
At the top end of the London property market several upmarket estate agencies regularly report on rent levels.
These reports have revealed heavy falls in rents as the corporate tenant market (a key driver of upmarket rentals) has suffered along with London’s financial services dominated economy.
All too often the press have picked up on reports from these upmarket agencies and misquoted these rent reductions as being the situation in all London or even all the UK.
This is clearly not the case as I know from direct experience.
So I am pleased to see that my old pal Michael O Flynn and his pals at FindAProperty.com have just launched a new rental index that really tells you what is happening down at your local level.
It is called the FindaProperty.com Rental Index and I urge you to check it out, especially if you are about to do a rent review.

HOUSE PRICES
Another man with his finger on the pulse of “what’s really going on” is Richard O Donnell, the Director of Research at Hometrack.
Writing in the Sunday Times on 22nd February he points out that the portion of income needed to service the average mortgage is now back at the lows last seen in 1993 - the bottom of the last house price crash in most areas. And this was before the last BOE rate reduction.
He goes on to say that it took 3 more years from 1993 for house prices to start their strong move upwards and adds that this was probably because it took that long for consumer confidence to improve and for the flow of credit to start again.
But he warns that this time is slightly different because unlike in the 1990s new house building has been decimated, so supply issues (few new houses) could possibly squeeze prices up faster than happened in the late 1990s - just as long as the flow of credit resumes again, of course.
I agree with Mr. O’Donnell though it’s worth stressing that this recession will be far worse than the one from 1989-1993 and that could exert a really big drag on house prices, even if property is in short supply.
Come to Our Next Evening Property Event in London Evening of 18th March

PENSION FUND MANAGERS - WHERE WERE THEY?
Why did the big pension fund managers – the only shareholders that really count - not spot what Sir Fred Goodwin and his Merry Men were up to?
Well, back when I was a young MBA graduate in 1988 I worked for a big pension and unit trust manager in the city for 4 months.
The impression I had was that the main pre-requisite for being a fund manager and controlling millions in assets was whether you had been to one of a few top public schools and then either Oxford or (in the case of this particular fund manager) St Andrews University.
Oh, and if you were a girl, your name had to to be posh enough to start and end in the letter “A”
Even my basic knowledge of stock price assessment from my first year of my MBA was more than these guys had.
Come to Our Next Evening Property Event in London Evening of 18th March

HOW LONG DOES IT TAKE A BANK TO CHANGE A LIGHT BULB?
Someone I have consulted with is buying an investment property right now.
Now you’d think that with exceptionally low mortgage volumes, the mortgage lender. Lloyds Bank Group (or whatever they call themselves since they mucked up on HBOS) would be able to turn around a mortgage application pretty fast, right?
Well, it is 2 weeks now since the valuer went in and still no sign of a mortgage offer.
As I say on page 74 of my book, it doesn’t matter how slow the housing market is, most conveyancers and all mortgage lenders will be as slow and inefficient as ever.
Why the delay?
Well, apparently the valuer forgot to do a rental assessment. Der!
I suggested to my client that he asks the bank that is lending the cash for some of the £549 valuation fee back. I’ll let you know how this goes.

TWITTER….. I DON’T GET IT
OK, I admit it. I heard the buzz and signed up to this new networking site that is supposed to be the best thing since sliced bread…but am struggling to see the point of it all.
And I fail to see how it can catch on or be of interest to anyone other than celebrity stalkers. If you think otherwise please enlighten me.
Come to Our Next Evening Property Event in London Evening of 18th March
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts. Read More Articles on Property by David Lawrenson.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker - and I run the well known property investment blog that you are reading now.
Come to Our Next Evening Property Event in London Evening of 18th March
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for a fee to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
Find out about some great deals we have arranged at our Landlords Resources page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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I’M STILL NOT INVESTING IN FLATS BY DAVID LAWRENSON OF LETTINGFOCUS.COM

At present all the talk is about the credit crunch and falling house prices and as usual with the press, the “headline grab” often obscures the finer details.
In reality, there are huge differences between the relative performances of different property types.
Even before the credit crunch took hold, government figures showed that between the year 2000 and 2007 the shortage of family houses led to detached homes doubling in value while the prices of new flats went up by just 18%.
The reason for this huge difference lies in the planning system which allowed or forced - choose your verb depending on whose side you are on - the UK’s developers to build too many flats and not enough family sized houses.
There has also recently been a smattering of TV programmes about how some novice buy to let investors lost money by investing in some of the many me-too-identikit-city-centre-new-build flats mainly in parts of northern England and the English midlands. Often these were flats they had never seen but they were somehow encouraged to by them at seminars hosted by property companies who persuaded them that they could not lose.
However, with too many of these flats being built and not enough tenants to go round, rents have been flat at best and prices, particularly for the identikit flats in large developments have been falling very heavily just at the same time that re-mortgages at decent rates have become very hard to find.
In some cases flats are now coming up at auctions at over a third less than what the investors paid and auctioneers report they are awash with repossessed flats many of which are not even making their auction reserve prices.

THE TYPICAL LANDLORD DOES NOT HAVE MANY FLATS
However, the novice investors who bought into such properties are actually a long way from what constitutes the typical landlord. For example, a survey last year by Mortgage Trust found that 77% of landlords have no new build in their portfolio at all. With landlords’ average loan to value around 60 percent and with landlord professionals (with more than five properties) owning 97% of the buy to let stock the typical landlord is not hemmed in by falling rents or lacking access to finance to build his portfolio further as the media would have us believe.
My own experience is that most professional landlords prefer bread and butter houses in established residential areas. And that’s not surprising, given that the lender, Paragon recently reported that rents on flats were up 6 per cent in the past 12 months but terraced house rents jumped by a whopping 20 per cent.
The same survey also showed that gross rental yields on terraces are 6.9% compared with 5.7% for flats. With an increasing number of families renting, the added space and flexibility that a house with a garden gives, is something that landords know will continue to be in high demand from tenants.
Figures from ARLA also show that about half of all buy to let investors expect to increase their portfolios over the coming 12 months and the vast majority of investment landlords said they would not sell if house prices should fall.
The facts are that smart landlords are investing. They know financially stretched sellers will listen to low ball offers and that rents will continue to rise fast as first time buyers are either unwilling to invest or unable to get mortgages. And, whilst the credit crunch means that these landlords now need to find at least 20% of a property’s value to get a decent mortgage deal, since many of them have lots of cash available from their existing portfolios that’s not a problem for many.

GIVEN THE BIG FALLS IN PRICES OF INNER CITY FLATS, COULD THEY BE WORTH ANOTHER LOOK AT TODAY?
But could the identikit flats being sold off cheap at auction today represent good value for buyers - whether landlords or for people buying for themselves?
For me, the answer to this just comes down to simple local future demand and supply. If there are many more flats about to come on stream in your area then avoid them like the plague.
At my consultancy, about 18 months ago I advised an investor client of mine with a large number of flats on a single huge development in Manchester to sell his portfolio because Manchester had given the green light to yet more flats in his local area - a fact that was easy to establish by just looking at the local authority’s website.
If there is not a problem with future supply, then maybe these flats could just be a good investment in the long term. However, all too often these identikit flats are full of short terms tenants and absentee landlords. And with no one around to push the managing agents to maintain the properties properly, they are often in a very poor state of repair and destined to become the poor ghettoes of the future.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a landlord advisors lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title: buy the UK's top selling property investment book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert freelance property journalist and property speaker a well known property blogger and I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Falling House Building Starts and Rising Rents is Good News For Those Who Buy Today says Lawrenson of LettingFocus.com

Just today, we have seen the most pessimistic RICS survey of the housing market ever.
The new Royal Institution of Chartered Surveyors’ (RICS) study found that the market is in its worst state for 30 years after a record number of estate agents reported falling property prices.
RICS said 82 per cent of estate agents in the UK had seen a drop in prices since the start of the year, with just one per cent reporting a rise. The ratio is the worst since records began in 1978, and means that the housing slump is even more widespread than during the crash of the early 1990s.
From reading these figures, it is my view that we are some still way off the bottom, possibly as much as 18 months off (though how far away the bottom is will depend upon on what other skeletons the banks have in the closet that they haven’t “discovered” or owned up to yet) This will all determine how long the resulting dearth of credit will last.
However, I would urge you to look at what is happening in your local area very carefully as it may differ very much from this national picture. As professional investors know, not all areas are the same. Some offer potential and some offer a potential to lose a lot of money.
Meanwhile, rents are rocketing outside the oversupplied new build buy to let ghettoes
I have just successfully pushed through some chunky rent increases on my own buy to lets.
In some parts of south east London where I have a few properties rents are up by well over 15%, but I have kept my increases some way below that because my tenants have been with me a while and I value that commitment from them plus I know I can trust them to pay the rent and look after my properties.

Fal In New Building Starts
At the same time as house prices have fallen, the lack of house buyers has resulted in a big fall in house building starts which are down 10% on a year ago. These figures are likely to get worse still as house builders twiddle their thumbs waiting for someone to come into their show homes, if only for a chat about what was on Corrie last night.
It all means that when the credit freeze finally unfreezes and the lenders start falling over themselves to lend all over again, there is going to be an even greater shortage of property that the new mortgage money will be chasing and when that happens prices will I think really take off fast.
So my simple message is this: It is hard to call the actual bottom of the housing market.
So look around you, make cheeky offers on property purchases and once you have the property you can enjoy strong rental growth. The capital growth may have to wait, but it will come and when it comes, it will come fast.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a buy to let and landlord expert from lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title: buy the UK's top selling property investment book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value. I’m an expert property investment speaker and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I can provide advice for landlords
Check out where I was recently featured in the Daily Telegraph:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/24/cmbuy24.xml&page=1
http://propertyclub.telegraph.co.uk/Page/View/222
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Time to buy property to let - from Lettingfocus.com.

If I had a pound for every time in the last two weeks some journalist or other contact said to me “Ooh dear, buy to let looks in for a bit of a fall now,” I’d have, er…. about £21Well, sorry folks but actually this year is the best time for the last 6 years to buy property to let.Every experienced residential property investor knows that you make a lot of the money in property when you buy. So when you buy, you have to buy cheaply.
When property prices are booming like they were in 2004 to 2006, vendors will not listen to offers and it will be a struggle to get value.However, in the current market, with vendors struggling financially, you CAN buy cheaply because vendors will listen to offers.And this scenario is made all the more attractive to property buyers because the credit crunch means there is a real dearth of buyers, especially first time buyers. This is because of two things. Either buyers believe all the guff in the press about a huge imminent house price fall and choose to stay on the sidelines or they simply don’t have access to mortgages.

CASH PILES
The smart investors have built up cash piles which mean they can access at least 20% of a property’s value – and they can get good mortgages deals too. They also know that the tenant pool has just got bigger and will continue to do so because all those buyers who are too scared to enter the market and all those who can’t get a mortgage will have to live somewhere. So, they are going to have to rent! This will further push up rents which have been increasing by almost 19% over the last year.It’s tough and I feel sorry for the first time buyers, but that’s the economy folks. And it’s brutal.Now, I have to say, here that I don’t think the property crash will be that severe (though in the Me-too-Identikit Buy-to-Let-Ghetto-Flats which were flogged years ago to hapless novice investors it will be hard – very hard indeed)
In most other places, I don’t think prices will fall far or for too long because interest on mortgages expressed as a % of average incomes (the affordability argument) is not that stretched.Yes really!Right now mortgage interest payments are gobbling up about 18.5% of peoples’ incomes.
This is above - but not much above - the long run average according to the council of mortgage lender’s stats.And even though they are a shade above the long run mean, with earnings still going up at over 4%, this figure will soon come down to about 15% and buying a property will start to look very cheap again.And finally, as we get wealthier, surely it should not be a surprise that people choose to spend a higher % of their income on property.
Why not? After all, clothes, CDs, computers, cars are all cheaper today than they have ever been -leaving more to spend on property.So, whatever the stats say, I think it is perfectly possible for a wealthier economy to live with spending more of its income on property. If by 2010, we look back and the year of 2008 did not turn out to be a belter of a time to buy property to let, then I’ll buy a big round of drinks and cook a great meal at my house for all the journalists who say otherwise.
I’m David Lawrenson from property investment mentors lettingfocus.com.
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website.My next London meeting is coming soon. Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

The signs say GO for house buying – just don’t tell the journalists, says Lawrenson of Letting Focus

House prices are down for the fourth month running according to the Nationwide. Their latest figures show a 0.5% drop in the month of February which leaves houses prices up 2.7% on an annualised basis
Just a word of caution, though, February 2006 was a strong month for houses price rises, so maybe that 2.7% growth figure looks a little worse than it is.
But notwithstanding that observation, it is clear that house prices are cooling a bit.
And as further evidence, the Land Registry has reported that the number of houses sold in November was 20% less than in November 2006.
Mortgage availability continues to get tighter too. As I sort of predicted in the last blog, other lenders have followed the Nationwide’s lead and are raising the amount that borrowers need to put in when they buy a property.
So, whilst, loans over 85% are still available they come at a much higher mortgage interest rate.
Of course, commentators who love to hate buy to let say, “Aha, all those landlords will have their come-uppance too from the new mean mortgage lenders”

Landord Default Rate is Low
The only problem (for these commentators) is that according to the Council of Mortgage Lenders buy to let borrowers still has a lower default rate overall than other mortgage loans, so landlord investors have not actually been hit as hard as ordinary residential borrowers by the tightening of lender’s criteria.
However, there has indeed been some tightening in buy to let lending – mainly on rent to interest ratios and on lending to borrowers who have a less than perfect credit history.
So, if you have a track record of investing in property and / or you have a good credit history and access to 20% of a property’s value, these are very exciting times.
Why?
Well, as lenders get meaner with who they will lend to, this is what will happen….
First, less people will be able to get mortgages to buy property
Second, the 1.4 million people have to re-mortgage this year may well end up paying a higher mortgage rate -and they may choose to sell their properties and rent instead.
Third, the tighter conditions and fewer buyers will cause house prices to slide - though this may not happen in earnest until around May. I predict house prices will be about 5% lower in December 2008 than they are now
Fourth, these conditions make it a great time to be in the market and buying property.
Why?
Because in a weak housing market, vendors will listen to offers and you will be able to get property at a good (i.e. low) price.
And because I think this year will be so good to buy property, I will be busy doing just that.
For that reason, and because of the demands of my consulting work, this blog will appear now just once a week.
However, we will endeavor to keep it as informative as ever.
If you need more advice on property investment or buy to let investment in general please ask me.
About Me
I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website http://www.lettingfocus.com/
Come to my next London landlords networking.
Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Why Tinkering with Pensions is Driving More People to Buy to Let

I see property expert Beeney was in the London Evening Standard yesterday saying that London house prices are due to fall heavily.
I agree they will fall, but I don’t think the fall will be too heavy – however after a recent strong rise, a pause for breath is well overdue in the capital.
But remember house price growth is very patchy and prices in many areas of the North and Midlands have fallen over the last 6 months.
The fact is that national house price stats have been skewed by massive rises in posh parts of London (driven by an unholy mixture of city money and the ill gotten gains from non UK domiciled overseas nationals attracted by our very lax tax regime)
Northern Ireland has also done well for reasons of “catch up” and a delayed impact of the peace dividend.
However, whether house prices rise or fall, in the long run this country is becoming more divided between rich and poor – and between house owners and tenants.
I predicted last year at the Property Investor Show that by 2026 half of all properties will be rented or second homes -and I still believe it.
That prediction got me a lot of press - and some stick, but let’s see shall we.I see one big lender has recently made a similar prediction.
If it happens, this will take us back to a mix of home tenure not seen in the UK since the late 1940s because without any change in the tax regime, buy to let will definitely continue to grow as a proportion of the housing stock.

Pensions and Property
Of course, Gordon Brown and the big cheeses at companies who make the decisions on company pension funds are doing their best to make traditional pension fund investment more unpopular than ever (and hence driving more people to buy to let).
And half the time, the poor pension saver doesn’t even notice what’s happening.
After all, there has only recently been a big storm about GB’s decision 10 years ago on the pension tax credit.
But there is more too - if you have a traditional pension I would strongly urge you to read Rob Budden’s excellent piece in last Saturday’s FT. It’s an eye opener that few people who are toiling away and putting money in their pension will be aware of!
http://www.ft.com/cms/s/13d3413c-ef56-11db-a64e-000b5df10621.html
Back to main site http://www.lettingfocus.com/

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

I’m David Lawrenson.
I have been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – which has been the UK’s top selling commercially published property book for the last 3 years.
Our main business is at a corporate level for organisations - both public and private companies.
We provide consultancy for banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

OTHER WORK
We also write for property websites and are regularly quoted by the media. In addition, we have written articles for numerous publications including The Independent, The Telegraph and quality landlord websites.

MENTORING
For private landlords, we also find some occasional spare time to help landlords and property investors make money in property by coaching them in ways that work, which are ethical and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one to one mentoring / coaching basis or through our occasional group seminars.
Unfortunately, in the UK today, property advice in the UK is still largely unregulated and what counts as “good advice” is too often more about making the promoter money than giving useful information to the investor.
With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

AT OUR WEBSITE LETTINGFOCUS.COM:

THE HOME PAGE OF THIS BLOG click here: Blog
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Copyright of Blog: David Lawrenson 2007.
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