Buy To Let property investment.


Neil Simpson is a former Personal Finance Journalist of the Year and the author of the Buy-to-Let Investor column in Financial Mail on Sunday. He is a keen property investor and writes about buy-to-let online as well as for a variety of publications including City AM.

When it comes to property investment I’ve always liked to stay close to home. Most of London I know quite well. Essex I understand. But all those glossy adverts for city centre towers in Manchester, converted warehouses in Leeds and quayside apartments in Newcastle leave me feeling just a little bit nervous. If they’re so desperate to sell to me, is it because the locals know something that I don’t? Is there something terrible just out of shot in the computer-generated pictures? Or is there an even better and more attractive development being built just down the road?

Off-plan property buyers in particular have been taking big risks by signing up to areas they hardly know. Yes, the internet lets us all do plenty of research about new places and it’s easy to get an idea of asking prices to buy or to rent across the whole country. But mistakes can still be made – and from now on I wouldn’t say that automatically rising property prices will lift us all out of them.

With this in mind I’ve never been hugely convinced that overseas property can be a serious buy-to-let investment. The papers write about it all the time because there’s so much advertising revenue in the market and because it’s easy for us journalists to slap ‘fly-to-let’ or ‘buy-to-jet’ headlines on the articles. Steer clear, I’ve always thought. But then along comes the two dollar pound and the bargain-hunter in me starts to wonder if I am missing a trick.

Currency transfer company HiFX points out that the dollar is the currency of choice in plenty of countries – it reckons you can buy well at the moment in Brazil, Belize, the Caribbean, the Dominican Republic, Malaysia and Mexico as well as in the US.

And America, of course, has seen its property boom end in key investment locations like Florida. Real estate agents say sellers far outnumber buyers across the state so it should be easy to strike a good deal if you’ve got the nerve. Fix your currency now and you can take advantage of the strong pound even if you don’t want to buy till later in the year, says HiFX. But should we?

My gut feeling is always that you only make money out of the holiday rental market if you are very lucky, very hard-working and drive a very hard bargain. Yes, the weekly rent is normally higher on short term lets than longer term tenancies. But turning the property around every seven days, riding through off-seasons and dealing with a host of other wild-cards can throw anyone’s plans out. So if I wanted to buy in America this spring to take advantage of the strong pound I think I’d be keener on the idea of a city centre flat or a suburban detached house I could rent out just like a British buy-to-let. But then the distance thing gets in the way. I don’t feel I know enough about the American rentals market.

What kind of properties do young professionals there want and what are the rental rules imposed on apartment complexes or even ordinary residential estates? What would my legal position be if I needed to boot out a tenant from hell? All this I could find out if I put my mind to it. But wouldn’t it be easier to just pick a property in an Essex estate agency or look at a few new-builds in London? Fortune favours the brave. But in buy-to-let in 2007 I’m not entirely convinced – though I wish overseas buyers all the luck in the world.

ANOTHER example of journalistic excess came in the Daily Express last week. We face ‘crippling’ rises in interest rates, the front page screamed after the worryingly high inflation figures were released. But, of course, we don’t.

Another 0.25 per cent rise looks almost certain for May now and we might even get a half point increase. But even if we do base rate will still be at just 5.75 per cent. Back in February 2001 when rates were last at that level I don’t recall us all feeling ‘crippled’ by our collective repayments. Or, indeed, for most of 2000 when base rate was 6 per cent and mortgage rates were even higher.

First-time buyers are overwhelmingly choosing to fix their mortgage rates so they don’t face the ‘nightmare scenario’ painted by the Daily Express. Meanwhile the online shoparound service Money Supermarket says that one borrower in five is currently paying far more than necessary on their mortgage by sticking to their lender’s standard variable rate. If all those people feel ‘crippled’ by another rate rise they can easily stop the pain by switching on to a better deal. The paper’s suggestion is that our mortgage market is on a knife-edge. The truth is that we are far better prepared for higher interest rates than the headline writers would have us believe. I’ve always said we shouldn’t believe all the hype in many property and financial newspapers. But we shouldn’t believe all the doom and gloom either.