Two Sides of the Coin: Landlords should be the Heads

Your call, Heads or Tails?

There has been a great deal of negative press associated with the property market over recent weeks. But I believe every cloud has a silver lining, every disappointment is an opportunity and that there are always two sides of a coin. Head and Tails. I like to consider myself along with fellow investors as the heads side. Here’s a few instances where this is the case.

  • Tails: Headline says “No Buy-to-Let”

Heads: High Rental Yields. It is true that banks have been very tight on buy to let mortgages, and we haven’t seen anywhere near the 85% lending we did a few years back, moreover many deals fall through because valuators are being very pessimistic with valuations. So what does this mean, well if the number of buy-to-let properties is not increasing that means supply is not increasing. Demand in the UK continues to rise, especially in London and the South East, this is pushing up rents as there is more potential tenants for each property, this is great news for Landlords. It means properties can be let faster and rents will be higher also. In my opinion Investors should embrace this and make it a win-win situation, hold steady and enjoy the higher returns on your investment.

  • Tails: Headline says “Falling House Prices Falling- Negative Equity

Heads: BUY BUY BUY. If House prices are falling, if you have the ability and cash, you should buy, these lower prices will only be a short term phenomenon, and they will recover strongly, land is a scarce resource especially in our ever growing cities and the populations are rising, its simply economics that prices will rise. Furthermore lower house prices only affect you if you want to sell, why would an investor sell and face such high capital gains liabilities. It’s about building a strong portfolio over time that can provide a steady income stream for years to come. Negative equity is meaningless and lower prices means greater rewards in the future, so buy.

  • Tail: Headline says “Low saving interest rates

Heads: High Real Property Yields. Invest your savings into bricks and mortar rather than fixed deposits or bond. The returns are many times higher and if you calculate returns the way I do, not by rental yield but by cash invested, as in deposit, divided by cash flow surplus (rent less mortgage payment), you will clearly see that the real returns on investment are many times higher. Add capital growth and long term price appreciation and its amazing how much the returns are. Low interest rates means lenders have to charge lower rates for money borrowed too, we won’t see mortgage rates anyway near the nineties levels especially as realistically the base rate will remain low for the near to middle term.

Overall I hope I have shed some light on the great position the market is in right now and that all is not gloom and doom.

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