Buy To Let
Buy to Let has been seen as a way for people to both invest in property and to earn an income from that property. There are benefits to society as well with property for low income families to rent.
Property has always been seen as a long term investment, when one looks at the prices of family homes in London 50 years ago it is easy to see why.
Before the Credit Crunch the buy-to-let lending in the UK accounted for 15% of all mortgage advances. Five years ago this figure was 3%.
The properties frequently need renovating, often involving splitting larger properties into smaller flats or apartments. The object is to maximise rental values on the properties.
The developers tend to go for basic accomodation, such as that for students or aim to produce high quality properties to maximise rental values.
The 'credit crunch' has caused problems. Developers are having problems obtaining mortgages on new build properties, and the mortgage companies are not accepting the property prices being demanded by the developers. Larger deposits are now being required or mortgages are simply being refused!
Legislation over the last few years has also complicated things for the buy to let developer. They should know that in 2006 the government introduced a new licensing scheme for houses in multiple occupancy. The landlord must obtain a licence from the local authority to be allowed to be rented, and the licence conditions must be met for the licence to be granted.
New investors will also need to be aware of the tenants' deposits scheme. The tenant deposit must now be held by an independent government-appointed company.
Clearly, with the 'credit crunch' and the drop in property values, some people are having trouble with their 'buy to let' properties.
People are having their properties repossessed and losing a lot of money in the process.
The significant problems that they are facing include the resale values have dropped significantly, with the property value falling below the debt on the property. Properties cannot be sold with significant price drops. The buyers are not in the market at the moment, and those that are want the best properties at the lowest prices!
It is also true that there are opportunities for those who are able to raise funds to buy properties, especially as the house values are falling. Although some areas are still strong, others have had significant property value falls. A buy to let investor who is not burdened with debt may well be able to take advantage of the current market conditions.
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