So, you want to get a BTL investment?

There are just so many “investors” who have done this in the last few years and so many who now want to do this.

Better return on their capital – banks (building societies etc) interest rates are an insult, stock market is not understood nor are intermediaries trusted, pension returns are negligible. In other words there is nowhere else to invest;
*Its a tangible asset;
*Theres little risk
*Cheap to borrow and lenders are starting to be more amenable;
*The Government is offering deals to encourage people to buy;
*Capital appreciation – property prices are starting to go up again and as we all “know”, prices double every 10 years;
*Rents are increasing;
*Armchair investing;
*Financial freedom – give up your day job / sack your boss;
*Landlords run a “cash-cow” with little or no effort;
*There are thousands of others out there who are making shed-loads of money doing it;
*TV programmes like “under the hammer” show scores of people making thousands per deal within a couple of months despite being clueless, so if they can do it…
*Theyve been on a “course” run by an “expert” who has hundreds of properties or been to a property meeting where there were lots of other investors.

Well it really isnt simple. In fact its hazardous – the risks, costs, legislation and time-consumption are all glossed over. I could disagree with all of the above, not just because I like to be contrarian.

Yes you can make a lot of money. However in the current climate you can also lose a lot, and the grief you can get from tenants who wont pay rent, and damage your property…
Buying, selling & renting sounds like a simple business. It no longer is that. Theres a lot of money in it, so it has attracted a lot of nefarious practices, snake-oil salesmen and people determined to transfer money from your bank account into theirs.

I dont subscribe to the approach of “take action”, “do it now”, “theres never been a better time” yada yada yada. A healthy scepticism is needed to make sure that your dream doesnt become the proverbial nightmare. Research. Understand. Ultimately you have to trust people, but not until you know them a lot better.

It deserves a book, but the subject range is so wide. There are countless books out there and they either specialise in sectors or strategies, or they are too broad & provide little insight or substance. You can spend months just reading because you dont know what type of strategy really suits you.

I’ve met a lot of the “Gurus”. Theres a lot of extremely capable, knowledgeble and skillful people out there, many of whom have a low profile, who will go out of their way to help you. Trouble is, how do you know The Good, The Bad from The Ugly?

Well, I can help, but without writing a book I will simply highlight a couple of key points from meeting lots of landlords & investors, and hope that you just consider these points before jumping into this marketplace.

There are issues that many ignore or arent aware of.

Being a landlord is really hard work. You have responsibilities to people 24x7x365. Lots of things go wrong. If you have a few properties, expect them to all have a problem at the same time! Legislation is interfering and making life difficult for professional landlords and especially at the lower end of the market it is getting increasingly political. Landlords are an easy target for vote-desperate politicians and (misguided) organisations like Shelter.

*The politicisation means they are looking to REDUCE rents. (they dont understand supply & demand).
*Paying benefits directly to tenants means many dont pay their rent!
*Evicting someone who isnt paying can take several months.
*Do you understand all the legal issues relating to deposits? Not many do.
*Do you want all this hassle?

Agents out there are getting a lot of bad publicity. Good. I will save my comments for my book.

Understand the maths. I will just throw these in for you to consider.

*Mortgages cost approx 4%. (excluding legals & fees)
*House prices are going up at 1%;
*True, non-manipulated inflation rate is probably at 5%, so your purchasing power is falling;
*Sterling has devalued by approximately 20% against the €uro and 12% against the $ in the last few years;
*Average gross rental yields around the country are at 6% (net yields will be a lot less when you deduct costs – something that most property investors bizarrely dont seem to do);
*Dont forget income tax on rent and Capital Gains Tax on price increases;
*What happens when interest rates rise to their average of 7%? (despite the impression they give, Governments do NOT control interest rates, the markets decide and Governments have to adjust to their costs). How many people will be able to afford their mortgage then? What will happen to property prices?

So, why is UK property a great investment?

In my opinion, if you consider all the above, are careful & selective & can make the numbers fit, it can be great…but the risks are now higher than they were and there just arent the number of deals that fit the criteria.

Tread carefully, dont be deceived by the media or the image of being a landlord and dont just “go for it”. Do your research & do your numbers.

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