Anish has four flats let as investments, having built up a small portfolio over five years. She has had high occupancy rates and a reasonable rate of return (about 6 per cent). She was going to buy more flats once residential self-invested personal pensions were introduced in April — a plan that has now been ditched by Gordon Brown. She has read that The Mortgage Works is stopping all new-build buy-to-let loans because of concerns about valuations. What should she make of this?
Linda Beaney, a partner at the estate agent Beaney Pearce, says: In certain areas of the country there is an oversupply of new-build stock aimed at investment landlords. It is therefore quite difficult in those places to value accurately, especially if rental properties are taking time to be absorbed into the market and there is a lack of owner-occupiers. Location, of course, still comes first when buying any type of property, but with an investment property it is important to feel certain that there will be an owner-occupier market when you come to sell.
Developments on brownfield locations on the fringes of London, for example, might be acceptable for a short period but are not necessarily where people want to have a home they own.
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Be prepared to do extensive homework in the area where you are buying. Find out what comparable properties sell and let for by checking local ads and speaking to agents.
The Mortgage Works is reacting to oversupply in the market — although some areas are enjoying substantial growth and demand — and it is far better that mortgage lenders help to regulate the supply chain than that it should become over-egged. Some housebuilders and property developers exert pressure on investment buyers by offering buy-to-let mortgage packages with lenders who have already pre-agreed valuations. Although, in the main, they may be totally appropriate it is sometimes worth taking an independent route rather than using the housebuilder’s nominated lender. You might lose a few hundred pounds in fees but that is better than finding that you have overpaid for something.
Residential investors should always be capable of taking a minimum three to four-year view. In any market you should expect to hit a downward cycle — then you will have the equity and capacity to ride that storm.
Beaney Pearce: 020-7590 9500
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