Thursday, 3 September 2015

Epsom Landlord’s mortgages top £137 million!

The Brits can’t stop talking about property. The hot topic of discussion at the dinner parties of Ewell, Ashtead and Cheam’s movers and shakers is the subject of the Epsom Property market, but in particular, buy to let. These people are buying up buy to let properties quicker than an ace Monopoly player ... or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money? Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is Yes and No to all those questions!

Firstly, the government gives tax breaks to landlords, as it allows the mortgage interest payments on a buy to let property to be tax deductible. Also, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which for an average Epsom terraced house, would mean finding £99,859 for the deposit (as the average Epsom terraced house is currently worth £399,439) and borrow the rest with a low interest rate buy to let mortgage. Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees and VAT. .. all things that eat into that profit.

Interestingly, by my calculations, there are approximately 734 Epsom landlords owing in excess of £13million in mortgages on those Epsom buy to let properties. An impressive amount when you consider Epsom only has 0.069% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor... but that sounds very fair!

However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Epsom Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Epsom Property Market before others, enabling them to buy better properties at better prices. For example, did you know that flats are selling for around 2% lower than 12 months ago in Epsom yet detached properties are selling for 19% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.

Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”. One place to find information on the Epsom Property Market is here at the Epsom Property Blog, where you will find many articles just like this. Or you can email Ian at ian@directresidential.co.uk

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