Is the property bubble going to burst?
The short answer is – no. There has been some discussion of late about London in particular. Experts consider our capital city has well and truly bounced back but the rest of the country is still working towards making up its losses (Chakrabortty, 2014). This means there’s plenty of opportunity to make good purchasing deals elsewhere.
It’s all about location
Simon Lambert of This is Money said this on the subject of a promising location: ‘Promising means a place people would like to live and this can be for a variety of reasons. Where in your town has a special appeal? If you’re in a commuter belt that has good transport? Where are the good schools for young families? Asking these questions might sound over simplistic, but they’re probably the most important aspect of a buy-to-let investment’ (Lambert, 2014).
I couldn’t agree more. One of my rules is that I only buy property in my local area. It takes time to become an expert in one area, it makes sense to stick to your neighbourhood, as you know the good and bad areas. Even knowing this in your own area will take time and research, but once you have done it, it should be easier for you to spot a bargain.
Finding the right seller
Fundamental to success is getting property below market value. Successful investors also consider who’s selling.
We’re looking for someone who has, perhaps, missed a few mortgage payments and credit is on the line. Maybe they are getting divorced and need to split proceeds quickly. We’re looking for a seller open to an offer below market value.
Essentially, you are looking for a win-win situation, for example to help sellers avoid repossession, and for you to get a good deal. Always consider what the sellers want from their situation and see if your requirements tally.
An interest in property
It’s important you take low interest rates into consideration when doing your sums – and be prepared for rises.
The Independent quotes Stephen Johnson, managing director of Commercial Mortgages, saying: ‘As the residential mortgage market settles into a new regime under the Mortgage Market Review, we may see a boost in rental from those no longer able to become homeowners.
‘If this happens all parties, including investors and lenders, need to work to ensure growth is sustainable. If interest rates rise this year, investors need to be comfortable that income from properties will cover the higher rates that will follow.’
Your figures will look good now because interest rates are so low, but they can only go up, so do build in a safety net.
Do always bear in mind that investments can go up or down, there are no guarantees. However, I believe property investment is as popular and rewarding as it ever has been, as long as you do your homework, remain ethical and keep as eye on reputable media reports.
Blackmore N (2014) http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10787173/New-mortgage-rules-pushing-up-rates.html. Retrieved 11 July 2014.
Chakrabortty A (2014) http://www.theguardian.com/commentisfree/2014/jun/01/britain-economy-dangerously-imbalanced-london-property-bubble. Retrieved 11 July 2014.
Johnson A (2014) http://www.independent.co.uk/property/firsttime-buyer-mortgages-continue-to-rise-9597364.html. Retrieved 11 July 2014.
Lambert S (2014) http://www.thisismoney.co.uk/money/mortgageshome/article-1596759/Ten-tips-buy-let.html. Retrieved 11 July 2014.
Harry would like to share his professional property secrets with his dental colleagues free of charge. For further information, please visit www.dentalpropertyclub.co.uk.
The content of this article is for information purposes only and shouldn’t be relied upon when making financial choices.