Property investors are back in profit as buy-to-let booms

Published 20th Jul 2009

Cash on deposit is earning next to nothing and the stock market is becalmed, with many companies unable to afford to pay dividends. So where do you go if you want a reliable income? Believe it or not, the answer for some people is property.

Yes, house prices are still falling and taxpayers continue to pick up the pieces of some of the big lenders that destroyed themselves in pursuit of property-related profits. And yes, thousands of amateur buy-to-let landlords and distressed homeowners face repossession and bankruptcy.

But many of those currently eyeing property investments are cautious investors. They don't aim to make quick money from rising property prices, but just want a steady income - and they believe current investment opportunities are outstanding.

They include couples such as the Humes, who have both suffered badly in the recession. Lisa Hume, 36, better known under her own name Lisa Knights, was a presenter on Setanta.

The couple, who live in Bristol and have another child, Noah, aged 22 months, have assets in the form of Lisa's redundancy, equity in their home and other savings. And although they hope to work again in their respective fields, they want their assets to generate income - and are looking to property to provide it.

They have not invested in property before and Lisa says: 'I've always thought that what people were doing was mad. Buying a property in the hope that it would go up in value was an incredible risk. We would never do that.'

Instead, she and Nick are focusing on yield - the rental return they can expect to get relative to their outlay. At present, the rent that landlords can collect from well-chosen properties can exceed, per year, ten per cent of the prices they are having to pay for properties in this depressed market.

Nick and Lisa are not fussy about the type of property - period or modern, houses or flats. Instead, it is all about price. Lisa says: 'If the price is right, the type of property or tenant doesn't matter.'

The Humes have been scouting properties for months, attending auctions and researching the market online. Interest from similar buyers is on the rise, Lisa believes.

'There is a change in the auction rooms,' she says. 'Six months ago we would attend auctions where few properties would reach their reserve price. Properties now regularly go for £20,000 or £30,000 above list price.'

This tallies with data from Essential Information Group, the authoritative property auction analyst. EIG says that last month 71 per cent of properties listed for auction sold at reserve price or above compared with only 54 per cent in June last year.

Demand may be growing, but prospective yields remain attractive. A new internet service aimed at investors, propertyearth.net, amasses data from lenders, developers and agents to draw together only those properties that are not in a chain.

These are primarily repossessions, but also include holiday homes, new homes that won't sell and properties being sold after the death of the owner. The site ranks properties by prospective yield.

The site shows scores of properties yielding more than ten per cent while the average yield of the 1,000 properties listed is 5.7 per cent. EIG managing director David Sandeman says his data shows that yields on 'oven-ready' property for sale at auction - where tenants are in place - are between 8.5 per cent and nine per cent. 'These high yields show there is daylight between income and likely outgoings,' he says. 'But landlords need that - owning property is expensive.'

As for Lisa and Nick, they have yet to buy. Their aim is to acquire two properties in the next year. 'We are cautious,' Lisa says. 'We want to be certain. Ultimately, we're putting our capital at risk.'

Source: ' Daily Mail '

View All Latest Articles