The buy-to-let timebomb - Published:30/10/07
Like so many young professionals eager to cash in on Britain's possessions boom, Paula Collins, a 26-year-old recruitment consultant from London, thought her money would be safelevel BROKE: Thousands of investors in metropolis centre buy-to-let flats have seen their equity vanish as prices fall and discounts turned out to be falseThe buy-to-let bubble is set to burst, says a appreciated City analyst understand writing the report and have your say: Buy-to-letThinking about investing in property This is cash has the best buy-to-let information and advice >> Buy-to-let tipsThe buy-to-let marketplace was booming and the contract from a Manchester developer seemed too good to pass onThe two-bedroom flat in the Castlefield region was appreciated at £175,950, but the developer was offering a 15% discount, taking the cost down to £149,500 - and best of all, no deposit was requiredHe would pay the 15% deposit Paula just needed to cover her legal costs and stamp duty If it sounded too high-quality to be true, it wasAfter 18 months, in which Manchester, similar to many northern cities, has seen a huge oversupply of new city centre apartments, Paula's flat is now worth just £140,000Her mortgage costs her £900 a month, but she receives only £600 a month in rent That's when she could find a tenant Now the flat is deceitful empty, so Paula has to base up £900 a month just to cover costs'The offer seemed too good to refuse at the occasion My boyfriend had some buy-to-let properties and I determined to do this one as a long-term asset, but I hadn't anticipated that the possessions would be so debilitating,' says Paula'I paid such a high cost, partly because independent valuers told us it was worth a lot more, and now I can't put up for sale because there are so many apartments in the area'I'm at a frantic stage I've lost an enormous amount of money - about £14,000 I'm getting wedded in a few weeks, but this has put an enormous strain on the relationship and led to endless pressure and tears It has greatly exaggerated our chances of being able to buy a house of our own now, and it has certainly left me disillusioned with the buy-to-let marketplace'Paula is not alone There are 900,000 buy-to-let landlords in Britain, many spurred on in the past few years by rising home prices and the accessibility of mortgages modified for buy-to-let investorsMany saw it as a get-rich- quick system in a buoyant market But interest rates have risen, home prices are falling and people who have borrowed beyond their means, or didn't set aside cash to wrap periods when the property is empty, are finding themselves unable to pay the mortgage and being forced to hand back the keys to the bankLast week, Gordon chocolate's adviser on the accommodation market, Kate Barker, confirmed that the buy-to-let marketplace is heading for a slump She said that higher interest tax, provoked in part by the sub-prime mortgage crisis in the US, joint with collapsing rental values, meant that petty property speculators were 'vulnerable'She also indicated that the Bank of England was unlikely to cut interest tax to help the marketplace recoverFor Britain's buy-to-let owners that is disastrous news For these are not slick-suited property tycoons with cash to burn: they are ordinary, middle-class populace hoping that bricks and mortar would be the safest way to spend for their future - perhaps to help pay for children's institution of higher education fees, or as a retirement nest-eggAll too often, they have been lured in by the developers with the promises of foolproof guarantees'The greatest problem is in big developments in cities counting Leicester, Manchester, Birmingham and Nottingham,' says Mike Goddard from Belvoir Lettings, which deals with 30,000 level lettings across the state 'The developers inflate sales prices and offer incentives such as paying legal fees or stamp responsibility, or they promise grossly exaggerated rental returns Novice buyers are drawn in and find themselves making a loss We choose up the pieces''Some developers offer a guaranteed rent for two existence to suck buyers in But when that time is up, the buyer is unable to get anything like the same rent on the open market and they may get the twice whammy of finding their flat is worth less than they salaried for it'Part of the problem is that so many investors have joined the buy-to-let bang that the rental market is simply oversupplied amazingly, 300,000 buy-to-let mortgages were taken out last year alone, creating one million properties financed on alike deals Yet the figure of landlords trying to off-load properties has jumped to its uppermost level in two years'So-called property experts, who charge a luck for their weekend seminars where they dazzle simple buyers with the science of buy-to-let, persuade people to invest their existence savings in something where the numbers now don't stack up'The result Not only have rental returns fallen in most areas, but outside London, property principles for rental flats have plummetedSmall speculate, then, that many small- scale speculators have had their fingers poorly burned When over-stretched buy-to-let investors fright, their first port of call is often auction houses Allsop, the state's biggest residential auctioneers, reports that out of 450 plenty in a big sale in London and Leeds last month, 45% of properties were repossessions after owners defaulted on their mortgage payments About half of those were buy-to-let investment properties'We anticipate the state of affairs is going to get a lot not as good as,' says Allsop's Gary Murphy Dominic Higgins, from Property Investment Advice & organization, agrees: 'The buy-to-let situation, especially in northern metropolis centres, is far more serious than people think A lot of investors who got set rate mortgages in 2004 or 2005, when interest rates were low, are coming off them now and could be in for a shock'People have been mis-sold savings So-called property experts, who charge a fortune for their weekend seminars where they prevent from seeing unsophisticated buyers with the science of buy-to-let, persuade people to spend their existence savings in something where the numbers just don't stack up,' says Higgins'One company tells populace that if they refuge't got enough money for a deposit, they can borrow it by paying it on their credit card That's horrendous advice'This is Money is packed with information, advice and tools that can help you get ahead and put aside moneyIt's a state of affairs that Neil Lyons, an electrician from Devizes, Wiltshire, knows only too well Tempted into buy-to-let by a self-appointed property guru called cut Rampley-Sturgeon from Activation Enterprises, who has since left bankrupt, Neil, 46, bought three flats at Old Brewery district in central Cardiff for between £127,000 and £157,000 eachHe intended to put up for sale before completion and make a quick profit But four years later, they are all still up for sale with no takers in sight, and are now each worth about £10,000 less than he salaried To make matters worse, he pays £1,000 a month mortgage on each possessions yet receives only £600 a month rental profits, before any running costs have been deductedAlthough he has seen better success with his two asset flats in Corby, Northamptonshire, which have risen in worth from £49,000 to £100,000 in three years, Neil blames the failure of his other metropolis centre investments on: 'My own naivety, developers' and agents' lies, as well as terrible oversupply'Don't believe that the higher up the chunk, the more the level is worth, because when you re-sell, they all go on at the same price''I've learnt a lot of lessons about buy-to-let,' he says 'Don't consider what anyone tells you about rental income - go and look, talk to lettings agents and do the arithmetic yourself Don't buy in blocks with more than ten apartments Don't consider that the higher up the block, the more the level is worth, because when you re-sell, they all go on at the same price'Don't believe it's a race and let anyone fright you into buying, and unless you have 40% cash to put down, don't even believe about it In fact, don't bother with buy-to-let on all on the moment'His knowledge is echoed by tens of thousands of small-time investors across the country Websites such as Property wind or House Price collide provide a forum for buy-to-let investors who have come unstuck to mourn their losses - and compare details of disastrous developmentsAt The Lofts in Huddersfield, flats have dropped in worth by 28per cent At Cranbrook House in Nottingham, a flat that sold for £204,000 in 2003 sold last imposing for £120,000The problems are not just in the North At Henry Laver courtyard, in Colchester, Essex, a flat that sold for £225,000 last day was going for £145,000 at auction recently Kate Faulkner, who runs the self-governing online advisory service Designs On Property, says: 'It's the worst place I've seen for a long time in the buy-to-let marketplace'She advises that only those who have enough capital to ride out the market for the next ten to 15 years should take the risks linked with buy-to-let The trouble is, even those who thought their investments were for the long word are often caught not readyTam Macdonald, 64, thought he was in it for the long word with his buy-to-let terrace houses in Liverpool But after a run of bad fortune, he was compulsory to sell up He bought eight houses for £22,000 to £45,000 each in 2002 and 2003, aiming to rental fee them to tenants on Income Benefit 'I saw it as a method of providing a good, steady income to enhance my pension,' says Mr MacdonaldBut the management corporation became unfocused by more lucrative developments in Spain and failed to gather rents or alert Mr Macdonald when his tenants moved out 'I had one tenant who didn't pay rental fee for over a year, but the organization company did nothing about it because he was a famous Liverpool drug dealer with armed heavies'Another, an refugee, got the hint he was being thrown out of the country, so he barricaded himself in one of my houses with what appeared to be an M16 ransack The street was closed down, the house was bounded by police - but the gun was a replica I was unaware to it all,' says Mr MacdonaldOne of his houses, built on an aged coal mine, was falling down, and another house was served a compulsory purchase arrange for demolition - the correspondence was posted through the door, so the tenant read it, right away moved out, and Mr Macdonald didn't find out for months that his house was sitting empty'finally I'd had enough and sold the houses at auction,' he says He was one of the fortunate ones He bought when prices were near to the ground, so he still managed to make a small profit, but it was barely worth all the anxiety Others who have bought at the top of the market will be much less fortunateIndeed, the market has now got so bad that John Socha, associate chairman of the National Landlords friendship, warns that virtually no buy-to-let investor now can wait for to make a profit - and certainly not the small-time speculators looking to construct up a shell egg'The price you're paying versus the rent you're getting is very unlikely to service the money owing, and that's the container in most places in the country,' he says Professionals, says Socha, look at hire income, not end profitNovices do the opposite 'They forget that they will have to pay capital gains tax when they put up for sale, and that when the developer or manager tells them they will receive a certain amount of rental income, they put on't mention all the costs you'll have to deduct such as maintenance and - if you're in a block of flats - the service accuse and ground rent'possessions sceptics are predicting a serious downturn in the housing market, but will there be a crash'You have to be smarter now,' says Tim Crighton from possessions Secrets, a buy-to-let advisory website 'Five years before, you could buy in a novel development, get a bit of a discount and not go far wrong Now, if you over-stretch yourself and try to make a rapid buck, that's where you can come badly unstuck'With the marketplace flooded, rents falling and no hope of a slash in interest rates to boost sales, it is advice that will come too not on time to put aside many thousands of Britain's buy-to-let investors who had sought safety in bricks and mortar, but were rewarded with only heartache and miseryI'm with Stephen Hulton, let's see the back of the BTL brigade Tenants should exist in council houses or housing friendship properties They've had too good a choice for far too extended now Let's hope that the councils and tenant relations can cope with the demand once the repossessions really take holdWell said,Rick of London Property in populace's minds is so hard it's better than £ notes, Who ever heard of any one charitable 15% discount on £ notes and paying any expenses concerned, that alone tells you the truth about the value of any tangible thing, it's all a gamble and financiers will tell you it is a matter of timing, clearly the developer got his timing rightThere'll be no collapse in the BTL marketplace, only a healthy alteration, perhaps a bit healthier than the market as a whole A fall in home prices and panic selling simply affords more easy buying opportunities for the crafty investor What we need is intervention from the narrow authorities: a tax on the BTL sector and other multiple house ownership, and stamp responsibility liability moved from purchases to sales (ie tax on income not expenditure)It's greed that gets people in this mess If it all worked out for them they would be bragging about how clever they areThese buy to let speculators should have been watching Paragon(BTL specialists)share cost their shares have collapsed over the last yearYears before someone gave me some sound advice: they supposed remember your investments can fall, as well as plummet Give it a few months, and once the herd of the get rich rapid dreamers have in use a bath, I should step in and buy them out cheapUtter nonesense: they were in it for the promise of easy money with little work I put on't complain when "expert" tips on horseracing don't approach inneither should they As for retirement nest-egg nonsense, the genuine slump will be when all these 30somethings all reach retirement at more or less the same age and all try to sell at the same timeAnd finally, certainly no-one would be so stupid to believe a £25k reductionobviously that was a made up cost in the first placeSelect a loan term 12 months (1 year) 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 existence 120 months (10 existencePlease select a type of insurance Life insurance house and contents Car Breakdown services Health - 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Simple Savings, Great Rates! - Published:23/09/07
The temporary shakes at Northern Rock are over, largely because the administration stepped in to guarantee every penny of savers' money Although Northern Rock savers should be relieved, I'm certain that many other savers are feeling cautious after the events of the history week However, I'd like to reassure you of three things:1 That saving part of your earnings each month still makes perfect sense The real hazard comes from constantly allowing your spending to exceed your profits2 That British banks and structure societies are still secure homes for your spare money If a bank really did get into trouble, then the Bank of England would step in with crisis assist In any event, Northern Rock was still quite solvent, even after £2 billion of withdrawals If belongings worsened, the store of England would doubtless order one of the huge banks to take over its struggling competitor Likewise, the Building Societies' Association would inquire one of the big boys to come to the help of a weaker society3 That interest rates on investments accounts look quite tempting at the moment With the Bank of England's base speed at a six-year far above the ground of 575%, today's savers are being offered some of the best savings rates since the twist of the century Indeed, it's possible to earn up to 7% a day on your savings, which compares well with the 29% yearly income on offer from the FTSE All-Share directorySo, where would you go to find an everyday savings explanation which pays a market-beating rate of interest, with no strings emotionally involved and no nasty withdrawal penalties luckily, I've done the spadework for you, thanks to the Fool's independent, impartial savings search engine To make things easy, I've unspecified that you have at least £250 to put aside (or transfer from another savings account) Also, you want simple access to your emergency fund, nest egg, or rainy-day fund, so I'll exclude become aware of and fixed-term financial records Here are the pick of the bunch:Bradford & Bingley Internet Saver6401Rate guaranteed to at least equal bottom rate until 01/01/09Northern Rock follower Online6311Rate includes a 106% bonus for a year Rate guaranteed to be no inferior than 050% below base speed until further noticeSainsbury's Bank6251Until 31/12/10, the speed will be higher than the standard rate paid by over 100 equivalent accountsIcesave620250speed guaranteed to exceed base rate by at least 025% to 01/10/09 and then at least competition base rate to 01/10/11By the way, if you're over fifty otherwise sixty, in some cases), then you also have access to special savings financial records which are aimed at senior savers Chief among these are the Coventry BS Sixty-Plus eSave 2 (for 60+ savers), paying 640% AER set for a year; and the Northern astound Silver Savings Online (for 50+ savers), paying 631% AERSo, there you have it: high rates of interest, simple access and no removal penalties What more could you want from a savings explanation Over and outMore: Find ace explanations in our investments centre | A Supersafe Home For Your Savings | huge News From The Credit Crunch© Copyright 1998-2007, The Motley Fool Limited All human rights reserved This material is for personal employ onlyPlace of Reg: England & Wales Company Reg No: 3736872 VAT Reg No: 735 7818 01 Registered.
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Current account switch nets ten per cent interest on savings - Published:31/10/06
Alliance & Leicester is initiation a savings account with an interest rate of ten per cent for a limited occasion onlyThe proffer is only available from 31st October 2005 till 30 November 2005 to those switching their present account from another provider to Alliance & Leicester's prime minister or prime minister direct current accountsCustomers will be able to put aside between £10 and £250 in the premier regular saver explanation at an interest speed of ten per cent annual equivalent speed (AER) for 12 monthsSimon Ripton, current financial records manager at Alliance & Leicester, said: "This will be a great way for persons to boot start a savings habit and at the end of the 12 month era, have saved up a nice little nest egg – there has never been a better occasion to switch"The premier regular investor encourages people to save a usual amount of money each month, the balance of which will be repaid into the customer's prime minister or prime minister direct current account at the finish of the 12 month period, along with the interest accruedcoalition & Leicester is currently promoting other offers for its premier range of current financial records including the 'advocate a friend' incentive and holiday vouchersMoneyExpert Limited is authorised and keeping pace by the Financial Services Authority (FSA Registration No 301654) The Financial Services Authority does not control some forms of mortgage agreement, credit cards, personal loans, current accounts.
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Current Account Switch Nets Ten Per Cent Interest On Savings >>
