Withdrawal of some 85% Loan To Value BTL Mortgages

The withdrawal of these mortgages is a worry for the recent investor like me. Our investment model is generally based on getting 85% mortgage products! I could not have got into Buy to Let in the first place without it. Basically because I started with such little amount of money. For those with a large bank account this is not such an issue!

I do not want to see this product dissappear altogether. Even if it does not dissappear I can see that it could suddenly get more expensive.

Yet more fall-out from the so-called 'credit crunch'!


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Advice on UK Buy-to-Let, Buy-to-Let Deals, and Buy-to-Let Mortgages
(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Another tenancy ends in tears!

Recently I let out a property and all seemed to be going well. Money was coming in and there was not signs of problems. Then, after a busy day sorting out general letting isssues, I got a phone call to say that one of the tenants has threaten to 'trash' my property after having been arrested for assault on his partner! Talk about a bolt out of the blue!

I rang the police for advice but they said that the co-tenant would need to testify to the threat and not me. I contacted her but she did not seem to think this was necessary but told me that she was leaving anyway!

So I am left with a tenant that appears to be a little crazy. Looks like this could be another big hit on my funds that should be used to pay off the buy-to-let mortgage deal!

I am sure there will be other posts on this issue...unfortunately!

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Valuations, valuations, valuations!

You may recall how I had put in for nine buy-to-let remortgages but only four came back at what I considered to be a realistic market value. Well, I did try to get my own surveyor to put a letter together and do some valuation research to 'prove' that the properties in question were worth more. Did this work? NO!

I could not get them to admit they were wrong! However, they through me a lifeline by saying that the only way to get another look at it would be to request a re-valuation. This sounded interesting because they had said that my surveyors data included some sales that were made after they had done their comparables work. So I thought they may be hinting at something here and I took their 'advice'!

Anyway, I just booked one revaluation to see how it would go and so far so good as this came up to full expected valuation! Previously it had been way off the mark! So I am progressing a remortgage on this right now, this should save me about £60 per month compared to what I am having to pay now on a standard variable rate deal.


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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Nationalisation of Northern Rock

The decision was taken to day by the Government to nationalise Northern Rock. I watched with interest (no pun intended!) to see what this might mean for me as someone with seven Northern Rock mortgages (6 Buy to let mortgages and 1 residential mortgage). Nothing was forethcoming however. I am hoping that this will mean that the reductions in bank base rate will come through in full rather than in part as they did at the reduction before the last one (not sure what is happening in response to the last reduction yet).

It would make bad reading for the Government if they were to not reduce the bank's SVR (standard variable rates) in line with bank base rate reductions. This is the rate that most people will be reverting to after a period of fixed interest rates. This would benefit me, and many other investors greatly. Most of us who were new to the game about three years ago were taken in by the Northern Rock mortgage offers on properties that did not stack up after the offer period ended and then we are locked in on this rate for four of five years unless we incurr large penalty charges to move to a different lender or even to a different product offered by Northern Rock.

I am hoping that the media get a hold of this story as it is a result of the bad management of the company in the past. Basically, I have heard from internal sources, that they loaned money out soley on the basis of the applicants credit rating and ignored whether the deal stacked up; not sure if this is correct or not but if fits my experience! I would even go further and say that someone somewhere must have known that the properties they were lending were overvalued...I am talking mostly about city centre apartments of course in northern and midlands area cities. Of course the advice we got from the financial advisers was to take the deal because they were being paid very large amounts of commission on these deals!

I hope to hear something in the news shortly! To my ultimate benefit of course!


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Inflation Predictions

Interesting things were muted about inflation on the News the other day...they are saying that it looks like we are going to go through a period of higher inflation. Given the credit crunch issues and the slow housing market it looks like there will not be too many changes to interest rates to try to curb the inflation either.

This could be an interesting situation for those with UK buy to let investments and mortgages as it means that affordability will increase as wages go up due to inflation. No-one is really saying this in the investment world yet, as far as I have heard, but it seems logical to me. So my advice would be to carry on investing as there may be a good return around the corner! It is time to go out there at the moment and get some good deals while there is a reduction in confidence in the market, when confidence returns those deals will be harder to come by!

Of course, no-one can be sure about what is going to happen and there are other scenarios but this one is worth considering!


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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Picking the best tenants

Picking the best tenants is an art that I wish I was a master of! However, I am starting to learn from my mistakes.

One thing I have learnt is that the tenants that don't pay rent generally don't pay for anything and when they have gone there is a host of threatening letters that are left at the house from credit agencies and debt collectors and such like.

This is why a credit check is a good thing to do before you take on a tenant. This is not however foolproof because if they have not actually been successfully taken to court the there will be no CCJ (County Court Judgement) show up on their records.

It is worth doing however as the damage done to the payments on your UK buy to let mortgage deal when they stop paying rent more than justifies the time, money and effort into making this check. I have even managed to put some potentially bad tenants off just by telling them that I will be doing a credit check and asking their permission to do this. So you can even find out some poor tenants just by stating you will be doing a credit check.

I really think it is worthwhile doing credit checks but I have had some tenants rush me into taking them on only for me to find out later that they just rushed me so that I would short circuit the credit check and have them in my property before realising it was a mistake! These people are often like 'professionals' at what they do! So take my advice and get a credit check done on each and every tenant...take a short cut and you will very likely pay for it some time soon!


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The Dirtier Side of UK Buy to Let

Well, I have just come away from one of my houses after going around to see why the tenant has not been answering the phone about rent arrears...they have gone!

Of course I had to post a letter through the door giving them 24 hours notice that I intended to do a 'property inspection' and would bring keys in case they were not in! Even though I could see that there was no-one around anymore! You have to do these things to stay legal! It is much easier to break the law as a landlord than it is as a tenant in my opinion.

Well, when we got in the place was absolutely terrible. I had been around before Christmas and pointed out what needed sorting out but things have just got worse since then. Also, it stinks!

I can hardly believe how awful people can be towards other peoples' property.

Well, all I can do now is get the place sorted, like clear up the mess and paint throughout then change the carpets which are beyond salvation. Once sorted I hope for much better tenants this time of course so I can get rent money to pay off the interest on the UK buy to let mortgage deal I have on that property.

I followed all the advice about getting a good tenant but still you can end up with bad ones!

I will also be chasing their debts with me though the money claim on line route once I have managed to locate where they have moved to.

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Repossession Figures

Well, the repossession figures for 2007 are said to be the highest since the nineties, it said on the News today. They also pointed out that there is a new form of 'repossession' and this is the 'Rent back' schemes that are in operation.

This rent-back system is something that most investors will be aware of. It is something that you can actually use in UK buy to let as these people are motivated sellers in that if they don't sell out then they will be repossessed by the bank and get all the bad credit history that is associated with that. So in this situation it is better for them to sell to someone and rentback their own home. On the face of it this may well be the best advice they could take in that situation.

So these rent-backs are a real opportunity for the investors who can buy the property and raise a mortgage against it then pay the mortgage payments using the rent. Obviously you can't just by any rentback opportunity, the figures will have to stack up so that the costs can be covered by the income.

So if you want to get into this market and mess up the repossession figures even more (to your profit), then do a search for 'rent back'. The companies that come up may be looking like they want to buy your house but they often sell on their leads to investors as they don't take all the deals and some just make business out of selling the leads. So open up some websites and look around for what you are after.

I have never done a rent back personally so I can't offer you any advice from my personal experience.


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Bank of England Reduces Base Rates to 5.25%

The Bank of England reduced Base Rates to 5.25% today as expected by most people in the know...an attempt to stop the economy going into recession and to stop the chance of house prices crashing.

But what will this mean for us with UK buy to let mortgage deals? Well that all depends on the nature of the deal you have of course. The potentially worst off will be those on what is known as standard variable rates from their lender. These are generally the highest interest rates and also the lender does not have to lower these rates in line with base rates. In fact, on the last reduction in base rates, my Northern Rock mortgages were reduce by only 0.15% when the actually base rate reduction was 0.25% ! I expect something similar again this time!

If however you have a tracker mortgage then this is actually tied to the base rates so if the base rates drop by a certain amount then the rate you are paying has to drop by the same amount as this is part of the deal.

I have a mixture of tracker deals and standard variable rates (as well as some fixed rate deals). The SVR mortgages that I have are because at the end of an offer period on a mortgage deal my mortgages have reverted to this, which is a normal thing to do and is part of the deal that you sign up for. The worst problem I have is that some of these deals also have 'extended tie ins' which means that I cannot change my deal and I have to stick with the SVR rate for about 4 years in the case of my particluar deals. If you take my advice you will stear clear of such extended tie in deals; they are very painful!


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The Panorama program on BBC1 last night

Please find below, the response of the company Property For Life to the Panarama Program last night. Also find my comment right at the bottom of this blog.

Response to Panorama program on BBC1 at 8.30pm last night.
"The Panorama program on BBC1 last night highlighted the plight of some investors who bought properties through a company called Morris Properties based in Leeds and have had properties repossessed as a result of not keeping up their repayments.

It was apparent from the show that these investors had not done very much due diligence in assessing the likelihood of renting out the properties at the figures suggested by Morris Properties. Obviously when anybody makes a decision to invest in property they need to do their research to make sure that the properties will rent out for the figures which are given by any company be they a developer, estate agent or property company.

However what the show also implied was that Morris Properties may have been paying bribes to valuers to overvalue property for lending purposes with the result that when the properties were repossessed they were worth far less than the figures given by the valuer. What the program said was that the Serious Fraud office were investigating the potential of this malpractice. We have heard that there have since been a number of arrests of valuers in the Leeds area as a result of this investigation.

PFL would like to comment on some of the issues addressed in the program as follows;
As a company we have all our properties valued independently by different RICS firms of valuers prior to offering them to investors. We do not engage in any passing of “backhanders” to valuers to influence their decisions to value property. As we operate all over the UK it would be impossible for us to influence valuers decisions in so many different locations.

As a result of using independent valuers we have to reject a number of potential properties that we could offer to investors because they do not value at the prices given to us by developers. This level of independence should provide comfort to the investor.

Neither do we pass “backhanders” to letting agents. We take independent advice from a number of letting agents in any development we offer and we encourage our investors to independently verify the opinions of these letting agents before they purchase any investment property.
The firm of solicitors that we use for our transactions are regularly vetted by the Law Society and the assisted deposit system they use has not met with any opposition from the Law Society to date.

Lastly as an investor you need to make sure that you have adequate cash set aside to cover rental voids. After all property is a business and one of the secrets to business success is to manage cashflow. "


Well, back over to me! I bought some apartments that I consider were overvalued at the time and in fact one of these was sold to me by Property for Life! But like PFL say, it is down to the investor to do their own due diligence work. I was guilty of just jumping on on the hype of these deals and ended up with four such bad deals where the rental income will no where near cover the mortgage payments after the initial special rate on the mortgage has elapsed and now I am locked in for another four years or so of such pain! Not planning on being repossessed though!


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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Land Registry Confirmation

The Land Registry has confirmed the weakening market in the UK on avarage. Over the UK there were ups and downs but the main trend is downwards.

"This month's data provides evidence of a downward trend in house prices," said the Land Registry. "Although the annual growth rate remains positive, this month's fall is a clear indication of a weakening market," it added.

In common with many analysts, the Council of Mortgage Lenders has already predicted that house price inflation will be largely flat in 2008. A smaller number of organisations have said they believe prices will actually fall. The latest organsiation to make such a prediction, the Centre for Economics and Business Research (CEBR), forecast that average property prices will drop by 2.5%, or £11,000, during 2008. But the CEBR said it expected prices to recover during 2009, boosted by the likelihood of further interest rate cuts this year combined with supply shortages.

The Land Registry data is expected to lead to further calls on the Bank of England's Monetary Policy Committee (MPC) to cut rates at its meeting next week. After voting unanimously to cut interest rates from 5.75% to 5.5% in December, the MPC decided to hold rates at its January meeting, but many economists believe a further rate cut is necessary.

So here's to looking forward to cheaper money lending in the near future! Also, looks like we might get some capital increases again in 2009 if interest rates are lowered. This is what I would expect. I am hoping that the pressure on inflation and the pressure on the money markets will mean that we keep interest rates low even though inflation may run higher than desired. This may be good news overall for property investment over the medium term.

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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Auction properties being sold by novice investors

All the talk I have heard recently is around Auctions this year. They are saying there will be a lot of good bargains there as the more novice type investors fail to be able to keep up to their UK buy to let mortgage deal commitments and have to sell quickly.

I have just seen one such property that is going for an offer price around 20% of what I know it was sold for (and it was sold at a discount from new a few years ago...I know because I was interested in it when I too was a novice investor!)

It just shows that you really do need to take good advice when investing in property or else it can end up costing you a lot more than the price of one of those so-called expensive property courses!

There is however no substitute for experience, but the school of experience does not come cheap as I have found out!

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A different perspective on the UK buy to let market

I read a magazine today that is available free and extremely informative, it is called the Jet To Let Magazine. Despite its title it also covers the UK property investment market. Look them up on Google and get your copy on order!

The people who write the magazine also run investment courses and clubs. I have been on one of their courses and it was very good and also reasonably priced. I have got to know the people behind it a bit and I believe I can trust their judgement.

Well, their judgement is that the UK property market will NOT crash or see significant price reductions as people are saying generally. It is their advice that you should be looking for good deals out there but buying in places where you have a USP on a property so that it stands out from the rest in case you want to sell it in a slow market. They still support the UK buy to let market as an investment vehicle over the longer term but recognise that the capital gains associated with this investment are over for the short term at least. For capital gains they are recommending investing abroad...but again carefully finding the best areas that have USPs (Unique Selling Points).

Other things are covered in the magazine such as some of their property deals and also article son the present state of the UK mortgage market.

Anyway, I hope they are right about the short term future of the UK property market...I am sure they are!

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Picking up the pieces of a broken tenancy!

I spent my Saturday picking up the pieces of a broken tenancy. This was the house where I had had to call in the baliff. The whole proces had taken me three months under what is known in the UK as a Section 21 Notice. I had enforced this notice so that I got my property back because the tenant has stopped paying the rent. I could have gone for a Section 8 Notice and used the fact that she had not paid any rent for over 8 weeks as the reason, but this notice can be legally fought against whereas there is really no real legal defence against a Section 21 Notice as far as I am aware. It is just saying that you want the property back because it is yours and you want it back. That was good enough for me!

It really was day of picking up the pieces...quite literally. There was all sorts of mess that needed cleaning up. Even outside there was some settees that had been thrown out as well as matresses. Also there was stuff of mine that had been put in the cellar which had then got mould growth so these had to be thrown out. So not only had I lost rent money to the amount of about three thousand pounds but also lost personal property to damage.

Looking forward, I am now nearly ready to take on a new tenant and get some money in the bank to help pay the interest on the mortgage deal secured against that property.

I have now started to look for guarantors which are people who will sign to say they will cover any money that is not paid in relation to the tenancy. I wish I had done one on this property. If you take my advice you will do this also in the future. I had one phone call today from someone who could not get this for me so I told them they need to find someone else to rent from!


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UK Base Rate cut expected in February

THE Bank of England was last night under growing pressure to order an immediate cut in UKinterest rates, following the shock three-quarters of a percentage point reduction in the United States.

Calls for the UK to follow the American example came after the Federal Reserve slashed rates in the US to 3.5 per cent – the largest one-day reduction in a quarter of a century.The surprise move was seen as a desperate attempt to avert a recession precipitated by the subprime mortgage crisis.Last night, the Governor of the Bank of England appeared to concede he would be forced to cut UK rates and pay the price of letting inflation climb above the 2 per cent government target.

In a speech in Bristol, Mervyn King said the Bank's monetary policy committee (MPC), due to meet to discuss interest rates in two weeks, faced "a difficult balancing act" in 2008.His tacit acceptance of the need to cut rates from 5.5 per cent came as he warned that higher energy and food prices, a lower exchange rate and higher import prices could push inflation above 2 per cent.]

The governor said this could force him to write an open letter – "possibly more than one" – to the Chancellor, the formal mechanism for explaining why the Bank has not met its target. He added: "Although there is little we can do now to avoid some rise in inflation this year, the task of the monetary policy committee is to ensure that it is short-lived. "If inflation expectations were to pick up in the wake of a rise in inflation this year, then only a more prolonged slowdown would allow inflation to return to target."

This cut in interest rates is good news for those with tracker mortgage deals and those that are on the SVR tie-in deals where they have to continue 'suffering' the SVR rate for several years after a discounted buy-to-let period ended. Far better in my mind though to have never got into the tie-in deal and that is something I would offer as advice to anyone getting into this business...don't make the mistakes I made!

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My first eviction!

Well, just over three years into my property experience I have had to carry out my first eviction...all legal of course and that took time and paper work! I used a Section 21 notice to inform the tenant of my intention to take back posession of the property. She did not leave so I had to contact the county court and fill in the relevant forms to enforce this. This gave her 14 days to respond and put up a defence (although I am not aware there is one for a Section 21 notice as it just states that you require the property back because it is yours and you want it back!)!

Anyway, she did not respond so then I had to to apply for notice to be issued to give her a date by which she should leave. She did not leave by that date so therefore I had to apply for the baliff to go and enforce the judgement. This time, apparently 10 minutes before the baliff arrived, she left! And she left a mess! But no major damage fortunately and all my posessions were left in the property.

During all this time, about four months, I was not getting paid any rent!

The message here is quite clearly that you have to be very careful who you rent to. But this lady was the daughter of one of my best tenants and came with good references and was very good to talk to so it seemed like a very safe bet! Just goes to show that you never know!

The thing that I wish I had done is get a signed Guarantor Agreement that gets someone else who is a homeowner to sign to say they will pay for any shortfall in rent or damage to the property. Take my advice on this one and in UK buy-to-let you should do this if you want to give yourself a good chance of getting your money to pay the interest on your mortgage deal....eventually!


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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

Possible Impact on UK Buy-to-let from World Financial Market

The news today was mostly about the financial markets around the world falling significantly. Apparently due to the lack of confidence in the US, and the expectation that it is heading for a recession, despite action by Washington to reduce the chance of this happening.

I was wondereing that impact this is likely to have on the UK buy-to-let market. Well certainly it is going to take the wind out of its sails! Especially if this undermines confidence further and house prices do start falling significantly.

However, I wondered if this might be like a cloud with a silver lining in that it would most probably force interest rates down a great deal and as my mortgage debt remains the same then it means that my income from the properties should go up. Well in actual fact, over my full portfolio I am not currently experiencing a positive cashflow so maybe this will help make it go positive.

We are told that rents are rising and if less people are in the market for buying houses then there must be more in the market for renting properties as we all need somewhere to live! So again, this should help with the rental income side of things, even if the net assets of the property portfolio is going to suffer in the short term maybe!

It would be nice to be in a position where all my income from the properties covers the mortgage payments and other running expenses as well as some money besides. In actualy fact, the most experiened investors would only every create cash flow positive portfolios, and if you take my advice so should you! I have a lot of positive cash flow properties but I also have some really bad negative ones that I bought outside my area of investment knowledge, so paid too much for them and the rent hardly even covers half of the mortgage payments...I made some bad decisions when starting out!


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More Market News Predicting a Downturn

I am a member of the RLA, which is the Residential Landlords Association, and I actually think they have some great information regarding the UK buy-to-let market. I respect their advice and ring their advice line regularly. It was therefore particularly disturbing to read in their latest magazine about the predictions for the year on house prices. There were significant downturns predicted.

It also talked about the adverse trend in buy-to-let mortgages due to the number of such companies leaving the market. I have seen this myself already with the lowest interest rate deals around having the highest administration fees which basically turns it into a bad deal to me. I mean the headlines of the mortgage deals sound good but then you find that the detail is not so exciting.

The only good news was the fact that they were expecting rents to continue to rise as many people stay out of the market for fear of negative equity.

I just hope that the fall in house prices does not work out. At least not in the magnitude that they are saying. I can't see how the government would let this happen, or at least they would do all they could to stop a market fall...at least a significant one.


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UK Mortgage Interest Rate Bias Switches

I asked my UK buy-to-let mortgage broker to see if she could find me a deal for the new property deal I have got into. She said that would be fine but we needed to move quickly as the tracker rates that are on offer were likely to not be so good in a few days time. This is because the general feeling is that mortgage rates are going to go down. So I took the advice and booked a product. I don't need to take this product out and could switch to say a fixed deal if I wanted, but if I did not secure the product then if the rates were changed to be less favourab le for the same tracker product then this would no longer be an option for me...and I would have to take the deal that may be on offer in a few days time.

When interest rates are changing it is a good idea to get some mortgage deals secured if you are thinking about switching, just so that you can secure the best deals around before the mortgage companies alter their rates to give them the 'upper hand' on profitability.

Clearly this is all spectulation of course but you have to go on something. I remember taking mortgage deals out about three years ago when all that was said was that the interest rates are likely to stay low or go down further. But what happened was that the interest rates actually went up and went up significantly!


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Valuation Problems

The revaluations (or 'revals' as they are affectionately referred to in the industry) on the UK remortgages I am trying to get through are in for a rough ride it appears. You may recall that a few blogs ago I told you about the low valuations that I got on some mortgage valuations I requested. At that time I only had two out of the nine that had coming on what I considered to be a true valuation, five were what I considered to be well below and two remained to be done.

Well the two that remained to be done have now been done and it appears that these are going to come in OK and therefore it means that four out of the five are up to the valuation I would have expected. So what does this mean? Well, given that the local market really is all the same I expect that I have had two valuers but the mortgage company will not let me know whether this is true or not as they are paying for the valuations and not me...well this is the reason that they give me!

I have a right to contest and I am contesting as I said in the earlier blog. However, I got a phone call to say that the evidence that I had submitted was not valid for various reasons. All I could see was that they must have referred it to the original valuer and he was digging his heels in as he would not want to be proved wrong by me! I have therefore asked my local surveyor for advice and also asked him to get the 'comparables' that they require in order to reconsider. I really want these mortgage deals and all that is getting in the way is a poor valuation!

I will let you know how I get on!


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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

A Lower Offer Accepted!

If you remember the blog from yesterday where I told you about the advice that the UK property courses teach when doing property deals...ie if you made an offer that was refused, but then a while later the property is still on the market, then put another offer in...but this time goi in lower!

Well I told you I had put a lower offer in by around 12%. I got this refused but we managed to agree today on a price 6% lower than my original offer! I got the message today on my answerphone that the offer was accepted. All I have to do now is let them know I am OK to go ahead with it and they will take it off the market and I get it for the agreed price.

So hopefully I can get my mortgage broker onto looking for a good mortgage deal for this property. It needs quite a lot of work doing to it so it is more of a 'project' than anything else. There used to be some really good refurbishment mortgages available for UK properties but since the credit crunch these are not so competitive anymore. Otherwise, such a mortgage product would have been ideal for this project.

I will just have to see what advice I get from my mortgage adviser tomorrow.


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Local signs of housing market

In the last blog post I mention that it was important to know what is happening in your own locality where you invest, rather than looing to the national UK news for the sentiment of the nation. At the moment it is believed that the sentiment is low due to the credit crunch and increased mortgage costs due to interest rate rises last year.

Yesterday a local estate agent rang me about an offer I had placed for a property...just to say it had been refused as being too low! While he was on the phone I asked how things were looking in terms of market activity, he told me that whilst things were slow in terms of enquiries, the actually level of purchase decisions was quite high. So this tells me that the local market is actually doing quite well and is less likely to suffer further reductions in house prices at the moment. It also tells me that the serious buyers are out there...do doubt these will be professional buy-to-let landlords who know that the time is right to go out and put in some lower offers on investment type properties.

Incidentally, the offer I was making was one on a property that I had already offered on earlier in the year...I had reduced my offer price by around 12% this time because of the change in the market and also because this is what advice you are given on property courses, ie to put in another offer in if the property has not gone, but at a much reduced price as the seller is more likely to take a lower offer now it has been on the market much longer. Six months can be classed as a long time but it really depends on the seller and why they need to sell. Some investors only view properties that have been on the market a long time, like for six months or more, so they know that a lowre offer is more likely to be accepted.

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House prices rise, not fall!

Halifax reported that there was actually an overall price increase last month not a decrease. OK so this was only 1% but at least it shows that prices are holding steady on the whole. I say on the whole because that is exactly what they are talking about...across the whole of the UK on average.

The reality is that there is no such thing as a national market as people buy in localities. I would say in my locality that the prices are falling, certainly since the middle of last year I have seen about a 10% reduction in asking prices. And this is what really matters, ie what is going in on the area that you are investing in. It is no good taking advice on property deals based on what is happening in the whole of the market, you need to know what is happening in your particular locality.

The only things that are common to the whole UK market are mortgage deals, not property deals! For mortgage deals there is no locality issues as far as I am aware. I have sometimes wondered whether this should be the case though. I mean sometimes, say the London market is roaring ahead, action is taken to cool the market in London but the rest of the UK is not roaring ahead so an increase in interest rates to cool London further impeads price growth in the slower parts of the country because mortgages are adjusted nationally. I suppose to do anything differently would be too complicated!

So, back to the report of an increase in house prices, what does this mean for the buy-to-let market in 2008? Well, I think it is too early to tell yet but I hope that it means we are not heading for the crash in the market that the doom mongers are predicting! A cooling of the market would be fine, a crash would be a problem!

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Interest Rates Remain The Same

The Bank of England decided to leave the UK interest rates the same today at 5.5% despite many people expecting a reduction in rates. The reason for this expectation was coming from all the negative press recently about house prices falling. I did not expect the reducing of the interest rates as the Bank of England would take advice from no-one and would just base their decision on inflation and house prices; which they have done!

It is a fine line that the Bank of England have to walk. It takes a great deal of foresight to judge it right all the time...they don't want house prices soaring yet they don't want them falling, and for inflation they need to keep it steady at around the 2% mark.

It is not such good news for us on higher buy-to-let mortgages but then it could prolongue a period where it may be good to get some good UK property deals!


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TV predictions for the UK property market in 2008

I have just watched a program on TV about the predictions for the UK property market for 2008. The doom mongers were having a field day with predictions of up to 30% price falls. I have heard this at the start of each year for the last three years! Of course they are saying this will be bad for mortgage companies as well as investors but could be good for those able to snap up some good property deals.

The downbeat advice by the doom and gloomers’ however has to be taken more seriously since the credit crunch coming out of the US where the market has definitely taken a dive. I was over there in the US a few months ago and it was amazing how you could see whole building sites just left abandoned as the property companies had decided it is just not worth building anymore as the property prices as not giving enough profit. This was down in Florida around the Orlando area where it was most noticeable.

Of course there are always areas that do very well when others are suffering. Over in the US I found building work going on a pace in Seattle when I got there. On enquiring about the local market I found that prices are still going up in that area. This is the area where Google is based and provides a lot of employment. There are also many other large companies in that area so the provision of work attracts people who obviously need somewhere to live. So quite clearly there is demand that is outstripping supply, and where this happens, even in an overall depressed market such as there is in the US at the moment, then prices keep rising.

So it is all the more important to find the right area to invest in UK buy-to-let…location , location, location is the investment mantra. This is not to say that you have to have executive type locations if your target market is say social housing, but there are areas and areas in the social housing field that you need to be mindful of so that you don’t invest in the wrong areas. I was always told that when there is a fall in prices the ones that suffer the most are the ones that are in poor or undesirable locations.


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The 'art' of property valuation

I have been told before by UK Valuers that property valuation is more of an art than a science and therefore there is actually no right answer. The practical outcome of this is that you can get different valuation figures form different valuers.

I have recently been subjected to this when I requested that nine of my mortgages were considered for moving to another lender. I got the valuers out to the properties and what came back was that three came up to what I considered a reasonable valuation and the rest fell way low of what I would have considered was reasonable. The problem with this is that I need to get the valuation to come out higher in order to get the mortgage deal which is based on a loan to value of 75% to get a better deal.

You can bet that the three that came out OK were done be one valuer and the others were done by another! Most UK buy-to-let training companies would advise you to be at the property when the valuer comes out so that you can ask whether there are any issues in it reaching the required valuation. This can have an impact on what the valuer puts into the report they think...well it may have if you are nice to him (or her)!

I totally agree with taking this approach however because I work it was difficult for me to get out and be there for each valuation. I therefore took a risk and hoped it would be OK but it has not worked out. I have now therefore got to try to contest the valuations and gather evidence to say that the valuations are too low! So it might well have been better that I had made the effort to be there and tred to establish a relationship and understanding with the Valuer that could have lead to a more favourable valuation figure. After all, valuing is an art not a science and therefore can be influenced, at least to some degree, by emotion!

So take my advice, which is the advice of the UK buy-to-let training companies, and make the effort to be there when the valuer arrives!


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When not to get the mortgage valuer in!

I have just gone through another learning point on when not to do something...this time when not to get the valuer into do a valuation for mortgage purposes...I just lost my valuation fee money because I got the valuation done and then the vendor pulled the plug on the deal due to some legal technicality meaning they cannot sell the property in the first place!

In good faith I had gone ahead with the mortgage application and then paid the fee to get the valuation done. I had also contacted a solicitor and paid them for the local searches to be done. The solicitors did not however commission these searches because they had not yet received a sales contract from the seller's solicitors. (This is something I have found solicitors do...ie they wait for the receipt of the sales contact before putting the local searches in place. Well now I know why!)

If I had waited for the contract then I would have known they were 'serious' about the sale. Well they were actually serious I think but apparently they lost a court case they had hoped to win which would have meant that the sale could have gone ahead without issue...but I did not know this when I asked for the mortgage valuation to be done!

So next time I will wait for the contract to come through I think! Just like the solicitors do!

However, in the UK this is no guarantee that the seller still won't pull out and if they do you just lose all the money you spent on arranging the deal up to that point...its just how the market works and part of the risks you have to take!



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A Re-mortgaging Trap

I had it confirmed today that I have fallen into a remortgage trap. This arises out of my worst investments..,.four new-build apartments. This is not to say that all apartments are bad purchases but mine definitely are! I bought each of these about two years ago using what is know as a 'gifted deposit'. This made the purchase very attractive and blinded me of all common sense! Basically it is the builder that say they will support the deposit with equity in the property so you don't need one!

Well in my situation I think that the truth of it was that the properties were over-valued and I just got a mortgage against such overvaluation (even done by a UK RICS registered surveyor that I had put my trust in!). This means I really did not pay anymore than it was worth, I just effectively got a 100% mortgage on it.

This was fine apart from the rental income has gone down (due to too many competing newbuild apartments in that area after the same tenant pool!), and mortgage rates have gone up. I was advised to take a Northern Rock mortgage as they accepted 'gifted deposits' as a true deposit (not all lenders did) but in return I have now been put onto their Standard Variable Rate which is the highest rate of interest they charge I believe.

So, what about the 'remortgage trap'. Well here it is...I took the mortgage out at the maximum of 87% loan-to-value and now Northern Rock have reduced their maximum to 75% on apartments. As the properties were overvalued to start with and as there has been no increase in value over the last few years (due to the shear number of newbuild apartments being built!), I cannot therefore change the mortgage to a more competitive Northern Rock deal without having to pump in a lot of money to make up the difference! Trapped! I will just have to suffer the high interest rates now! When I spoke to them about this all they said was well you knew the deal you were getting into...true, I did , but I did not expect they would reduce the LTV to 75% !

I am not sure that I can go elsewhere either for a better mortgage deal as a lot of lenders are now following suit...ie reducing their LTV to 75% on apartments.

So there is something worse than a bad investment deal...it is a bad investment deal financed with a bad mortgage deal!


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A nice easy 25% profit?

I have a new refurbishment project underway and my electrician rang up today to ask a question about some cable routing for the kitchen. After I had told him what was required he got talking about how the buy to let business works.

It turns out that he fully expects that after I have refubished that place I will make 25% profit on it if I sold it! I explained to him that it is not quite that easy! I guess there are some deals out there you can come across that would give you this but I can't say that I have come across any recently.

Still, I expect I will be able to make between 5 and 10% which is quite OK for a few months of arranging workers to go in there and fix it up for me! Not that my intention is to sell of course, I want to hold on to it for a while for rental income and also to wait for more capital appreciation.

For refurbishment projects the best advice is to go for 20% margins but at the time that I got this property sale agreed it was pretty difficult to find any potential projects in this category in the area where I buy property!

But with the market like it is at the moment, I think I should be back out there looking for deals like this...they do exist...it is just a matter of finding someone desparate to sell in a depressed market.

Happy house hunting!


The Buy-to-Let Blogger
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(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)

New Year's Prediction on House Prices in the UK

Here we go! I was just watching TV and a recognised TV news presenter offers his main prediction for 2008 as 'House prices will fall 5 -10%' ! This is not the first time I have heard this recently of course.

To some extent this is has been stated for the last three years or so, however prices have continued to rise. However, give the recent credit crunch issues I fear there may be some truth in this for 2008. When I say 'I fear', I mean it is a bit worrying for people like me who have only just started investing in the last several years while prices have only been rising slowly because our equity may easily be wiped out if this happens.

For me this just underlines the importance of making sure you buy property at below-market-value prices so that we are buying instant equity which gives us a little bit of a buffer in case the general market does take a downturn.

It just turns out that the best time to pick up property bargains at below-market-value prices is when there is some doubt about the future of the housing market! So it is not all bad news if there is a little drop in house prices, as the buying opportunities for below-market-value properties will be greater!


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Advice on UK Buy-to-Let, Buy-to-Let Deals, and Buy-to-Let Mortgages
(Our only true advice is that you should always take professional advice before investing, treat any 'advice' on this Blog purely as information and not a substitute for professional advice.)