The 2009 Property Investors

Firstly there is a new type of landlord - homeowners who are unable to sell their properties are renting them out. The homeowner may set their rental cost at only the amount that they need to cover the mortgage rather than on market rates and also at a rate that will as good as guarantee a tenant.  The condition of homeowner property is also generally of a very high standard and as a result this new competition drives down previous market rates.  This generally affects larger, family properties rather than smaller flats.

Availability of finance is dramatically reduced and as a result the profile of a property investor has changed.  Prior to the credit crunch no deposit was needed - a mortgage could be given on the expected yield provided the rental yields were 125% of the mortgage repayments.  Now, a standard 25% deposit is required and the applicant must have a good credit history.  When mortgages were easily obtainable, buyers could turn around a property quickly i.e. buy, renovate and sell on at a profit, and then repeat the process, cashing in not only on the price increase due to the renovation work but also on the cash increase from the rising property prices.  Now, the profile of the property investor will be someone who has cash for a sizeable deposit, a good credit history, and someone who is willing to hold onto the property for a few years waiting for the property market and economy to turn around. 

And for the newer property developers?  Well, for some who kept securely on top of the figures or those that did not overstretch themselves then they should survive the downturn.  But for those novice property developers who perhaps bought property without fully researching the possible pitfalls, well, they could be in trouble.  If they were assuming to sell on their property quickly and at a profit, they are likely to be selling it at a loss, if they can sell it at all.  Or, possibly they are unable to rent out their property and need to cover the mortgages themselves.  Or they have taken on too many properties and find that their own employment is at risk and their main source of income will not be the safeguard it was.  Or they were keener to buy a set number of properties rather than buying property that met strict criteria i.e. properties that would yield a set positive cash flow each month.  Or they have come to the end of a mortgage deal and now the mortgage rates for buy-to-let are less favourable.  The list could go on...

However, for the property investor who ticks all the right boxes 2009 could be a good year.  The key is that you are credit safe in order to secure a mortgage.  If you can secure a mortgage or have enough cash, then you will be able to find some bargains, particularly in the latter half of the year as the recession continues to bite.  If you are thinking of buying an investment property you need to consider the five following points:

1. Consider it to be a mid-long term investment - the property market is likely to fall and then stabilise for a few years before rising again.

2. Your expected rental yield has to be realistic and has to cover the costs of the mortgage, insurance, maintenance costs and void periods.

3. Although interest rates have fallen again, they will go back up at some point - you need to factor this into your costs, or choose a mid to long term fixed rate mortgage to avoid unfavourable rate changes.

4. Research and know where you want to buy property and be sure to stay within this patch - your rental yield depends on it.

5. Always make a low offer when purchasing, stick to your figures and know your limits.

2009 could be a great year for property investors providing you research, plan and take care at every turn.