There are no fast bucks in bricks and mortar

The boom may be over, but there are still rewards for patient investors, says Laura Brady

Whatever happened to buy-to-let? It used to be a hot topic at dinner parties but now conversation takes place in a nervous whisper.

Whatever happened to buy-to-let? It used to be a hot topic at dinner parties but now conversation takes place in a nervous whisper.

The vogue for buying properties specifically to rent out was rooted in the recent housing boom. Fast-rising prices encouraged homeowners to remortgage, release equity and invest in a second property, then a third and so on.

The combination of soaring prices and strong rent yields propelled healthy investment returns, but these have levelled off during the price slowdown and dampened enthusiasm among potential new investors.

"If you are looking for a quick buck, the boom is over," says Jonathan Moore, marketing manager at buy-to-let broker Mortgages for Business. "This seems to have put some people off: we have seen business shift away from small investors towards the professional landlords who have 10 properties or more."

Robert Jordan, chairman of Jordan's Residential Lettings, reports a similar pattern. "Plenty of existing landlords are coming through the door asking us to manage their property, but there has been a sharp downturn in new landlords," he says.

"This is because they are waiting to see where prices go. After all, why not wait until next month to buy if you can save a few thousand pounds?"

The Association of Residential Letting Agents (Arla) claims investors are too focused on the short term. "This is not a market for speculators," says spokes- man Malcolm Harrison. "You would be foolish to plan to enter the market for less than five years. Most successful landlords have a view of being in it for between 16 and 17 years."

This long-term view explains why existing investors are unfazed by the cooling housing market. A survey from the National Landlords Association (NLA) last month found their top concerns were regulation and unreliable tenants. "Interest rates and house prices hardly appeared on the radar," says NLA chairman David Salusbury.

Similarly, even though landlords were forced to subsidise mortgage repayments on 17 per cent of all investment properties last year, some 61 per cent said capital growth was the most important aspect of their investment, according to broker Savills Private Finance.

For those wondering whether to invest in 2005, there is at least a greater choice of buy-to-let mortgages, says Mr Moore.

Most buy-to-let lenders insist that the rent on the property amounts to a minimum of 130 per cent of the loan's interest repayments - usually calculated on the lender's standard variable rate, he adds. "But as house prices have risen and rents have not, this has become increasingly difficult. That's why some now only require 100 per cent of the rent to meet the interest repayments."

Other lenders are lowering the rates payable on buy-to-let loans, which are traditionally higher than on residential ones.

Mortgages for Business is offering a lifetime tracker buy-to-let loan at base rate (currently 4.75 per cent) plus 1.14 per cent. The rental cover is 130 per cent and the deal carries a £495 arrangement fee.

If you do your homework, there might even be opportunities for a relatively short-term capital gain, says Mr Moore. "The trick is to look for areas that are being regenerated or seeing new travel links built."

Martina Johnson bought her first flat in Finsbury Park, north London, for £81,000 in 1995. Two years ago she decided she wanted more space, but as its price had more than doubled, she opted to release some equity and invest in buy-to-let.

She bought a two-bed flat in Kentish Town where she now lives, and rents out her old home. However, she was without tenants for three months last year and has since been forced to reduce the monthly rent to £810 from £910.

"But none of this matters. The flat is basically my pension."

Suggested Topics
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future