Thursday 22 October 2015

Chelmsford Landlord’s mortgages top £1.6 Billion!

The hot topic of discussion of Chelmsford’s movers and shakers is the subject of the Chelmsford Property market, but in particular, buy to let. Landlords 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? The answer is Yes and No! 

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 pick a property at random and agree a price, then find a modest deposit of 25% (often by remortgaging their own home) which for an average Chelmsford terraced house, would mean finding £63,330 (as the average Chelmsford terraced house is currently worth £253,320) 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 rent then covering mortgage payments, & loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in 15 years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the 0.5% 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... all things that eat into that profit.

Interestingly, by my calculations, there are approximately 7,600 Chelmsford landlords owing in excess of £1.6 billion in mortgages on those Chelmsford buy to let properties.  An impressive amount when you consider Chelmsford only has 0.22% 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, such as fixing mortgage rates for the first few years.

However, one thing I do know is that buy to let is a long term investment, it’s a 10, 15, 20 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 Chelmsford Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Chelmsford Property Market before others, enabling them to buy better properties at better prices. For example, did you know that Semi detached properties are selling for around 2% higher than 12 months ago in Chelmsford, yet detached properties are selling for 5.3% 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.  

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