For Buy toLet market, the last few months have been difficult for the landlords with thecredit crunch came increase on arrears, lack of buy to let mortgages andtougher lender's criteria. But it is not all bad news, the houses are cheaperto buy, the rents still increasing and rental demand at all time high.



CreditCrunch

Last year,we started to see the effects of too much borrowing and declining in houseprices in USA. One year later, economies throughout the world started tocollapse, financial institutions going into administration, Governments in theverge of bankruptcy, mortgage lending at very low levels, UK house pricescoming down and a global recession.

It's allbad news, no! The buy to let market is stronger than ever with the demand forrental properties being higher than ever, due to first time buyers not movinginto the ladder and immigration from east European countries.

 Withina dreadful situation, we can always find good opportunities.

2009 NewYear, New Hopes!

 Itwill be into 2009 that we shall see some improvement on the lending, speciallybuy to let mortgages.

It's beenpredicted the houses prices will still coming down but at much lower pace andprobably in 2010 they may start coming up.

For thelandlords it's a time to consolidate and review their portfolio with greatopportunities to invest if you are in strong position.

Buy to letMarket  

Between2004 and 2006 the buy to let boomed, due to easily accessible buy to letmortgages and property prices growth. Now the buy to let mortgage diminish,tougher lenders? criteria, specially rental cover, and house prices are comingdown. 

Buy-to-letis no longer sizzling and many investors that started being a landlord inrecent years are struggling as mortgage rates rise. Many could not changemortgages due to low or negative equity, so when the initial rate deal came toan end and they started to pay the Standard Variable rate of the Lender, the rent was not enough to cover the mortgage payments.

Withinthe most affected are those investors who bought properties at a supposediscount to sale straight away, looking for short term investment but whenproperties prices started to come down and the houses taking longer to sale,they run to serious problems.

Thegolden rule of buy to let investment is to look as a long-term investment,taking seriously. If the landlords invest wisely, look at long term, do thehomework and stick to the tried and tested method of investing for rentalreturns rather than capital growth, they will be successful. Otherwise, theinvestor will probably run into serious problems.

Buyto let investment does not guaranteed success as any other investment but doingit well and it can be an excellent piggy bank for retirement.

Iam leaving now some tips for all professional or first time landlords:

Doyour homework

If you are a first time landlord look at pitfalls before you look at thebenefits, buy to let investments are time consuming, therefore think if it isthe right time to invest in buy to let or leave the money on a good savingsaccount.

Ifyou are already a seasoned landlord, do not stretch yourself, look first toconsolidate and add strength to your portfolio, as if you are in strongerposition your next investment  will run smoothly.

Location,Location, Location

It pays to choose carefully where your next buy to let property will be. Thisdoes not mean to buy on a cheaper or expensive location but rather the rentaldemand in the area. Look for clues like if is near a University or Hospital,very trendy area for professionals, excellent amenities and links, etc. Avoid all cost areas with oversupply of properties to let, look at propertiesand letting agents? websites and if a certain area has numerous properties tolet, think if you want that kind of competition as you may have to negotiatethe rent down to let the property.

Lookat the figures

Beforeyou buy, take a look at several properties, writing down the ones are of yourinterest. Look at the rental yields on them, see if the rental income covers atleast 125% of the mortgage payments and if worth to spend around 25% on adeposit, this will help you to secure finance and a good rental yield. Many lenders restricted the Loan to values to 75% or less and rental cover to120%-125%, you can still arrange products with less rental cover but think ifyou want to restrict your rental yield.

Yourtarget tenant



Think who will be your tenant and imagine in his shoes? If you are student youlike a place to be comfortable and clean, links to university, nothingluxurious. If you are a professional you will be looking at a modern andstylish interior but nothing too pretentious, and excellent links. If it is fora family rental, do not put any furniture in, leave as a blank canvas, normallyover the years the family has a few belongings they want to take to the nextproperty.

Lookinto your portfolio

Reviewyour portfolio, see if the initial rate deals in any of the mortgagedproperties ended and compare the rate you are or will be paying with the ratescurrently in the market. If you are better off with the lender's StandardVariable rate, does not mean you stop looking for a better deal. Try to lookonce a month for new rates or ask to your adviser to keep an eye on theproducts.

Seeif there is any opportunity within your portfolio to get a higher rentalincome. Why not transform a house with 3 bedrooms, 1 dining and 1 living roominto a 4 bedroom house with living/dining room; make a loftconversion/extension to get 1 or 2 more bedrooms; renting by the room, as bythe room the rental income is normally higher (but must be on right area). Thepossibilities are immense to add value to your portfolio and increase yourrental income without spending as much money as buying another property. 

Lookat other areas

Most Landlords invest where they live but most of the goodopportunities are normally in other areas.  Do not be afraid, as if youfollow the golden rule, can be very time consuming investing areas away but canbe worthwhile.

Askfor a discount

Whenyou buy an investment property, you must not forget you enjoy the same benefitsof a First time buyer - No chains, so you can move quickly.  If you do notask for a discount you will not have it.

AvoidTenancy pitfalls

Putaside at least 2 months of rent, in case when your tenant move out or when youjust bought a property  will help towards the mortgage payments until youfind a tenant.

Worth paying for a complete tenant check report, where the provider will getyou a credit file of the prospective tenants, check their ID, get thereferences and they are not expensive.  It is not guaranteed you will begood tenants but helps a lot.  Also, you should consider a rent guaranteedinsurance, where can cover for rent arrears, pay towards the legal costs toevict the tenants and damage made on the property. With this type of insuranceyou may request a lower deposit from the tenants to match the excess of theinsurance, that may help to secure a tenancy quicker.  

Shoparound

Shoparound for letting agents, ask a discount to traders: plumbers, furniture. Themore you save the higher will be the return from the investment.

GiM