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!
The Buy-to-Let Blogger
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.)
Sunday, 17 February 2008
Thursday, 14 February 2008
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!
The Buy-to-Let Blogger
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.)
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!
The Buy-to-Let Blogger
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.)
Monday, 11 February 2008
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!
The Buy-to-Let Blogger
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.)
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!
The Buy-to-Let Blogger
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.)
Sunday, 10 February 2008
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.
The Buy-to-Let Blogger
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.)
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.
The Buy-to-Let Blogger
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.)
Friday, 8 February 2008
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.
The Buy-to-Let Blogger
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.)
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.
The Buy-to-Let Blogger
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.)
Thursday, 7 February 2008
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!
The Buy-to-Let Blogger
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.)
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!
The Buy-to-Let Blogger
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.)
Tuesday, 5 February 2008
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!
The Buy-to-Let Blogger
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.)
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!
The Buy-to-Let Blogger
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.)
Friday, 1 February 2008
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.
The Buy-to-Let Blogger
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.)
"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.
The Buy-to-Let Blogger
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.)
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