I've been reading (with some amusement) the posts by people who have either attended, or are considering attendance at one of the "Buy-to-Let" seminars, many of which cost several thousand pounds.
For what it's worth, I'm a director of a UK property development company that currently has several hundred flats under development. I can only offer you the following advice: you do NOT have to pay thousands of pounds in order to be in a position to buy rental flats at a discount. For example, I have a project underway at the moment in which I have over 100 flats that I would happily sell you at a genuine discount of at least 10%. Why? For the same reason that most developers would: in the early stages of a development, with 18 months before project completion, the bank wants us to reach certain sales levels. So we take a much smaller profit on flats we sell earlier, just to satisfy our bank's requirements. In six months the discounts won't be available, but now, when we need early sales, we give some pretty good deals to investors.
But you don't need to pay fees, or attend seminars to buy these flats. You can deal direct with the developer...not even an estate agent between us.
Here are a few things that you won't be able to do...despite what you may have read in some of the ads for the seminars:
You won't be able to get 90% financing. Those days are, at least for the moment, over. Count on having to put up a deposit of 25%, with the bank putting up the rest. Sorry, I don't make the rules, but by virtue of the formulas that the banks are currently using for buy-to-let properties, even at the still-very-low interest rates you just can't realistically expect much more than 75% funding. But that's not such a bad thing. You'll be paying your mortgage from your rental income, and perhaps have a (tiny) bit of money left at the end of the year. You'll benefit from all appreciation that takes place...and of course as rents rise your cash flow increases.
You also won't become a "property millionaire" in several months...or even in a couple of years. Sorry, but it just doesn't work that way. It's a slow, steady grind. If you do everything right, you will get there...but it will take time. And by the way, just because you own flats with a total value of 1 million pounds, you almost certainly are NOT a "property millionaire. What those flashy advertisements fail to acknowledge, is that almost all buy-to-let investors have something called a "mortgage". If you owned property worth a million, but your mortgage was two million, would you consider yourself a millionaire....or broke? That's an extreme example, but most investors who have a million pound "portfolio", also have at least £700,000 in mortgages on their properties...so their net worth is only a fraction of a million pounds.
You also aren't guaranteed to make money. People do lose money in property. Admittedly, it's harder to do than in most investments, but if you take a few wrong steps, it can happen. At this point in time, apart from the obvious admonition not to over-pay for your property and not to be lax in the management of it once you've bought it, the greatest single factor is where you buy. There are some parts of the UK in which I wouldn't even consider buying...the risks are just too high. Many areas are fairly safe, but of little interest to me. A few spots are, in my opinion, money in the bank. They always said that the three most important things affecting the value of property were "location, location and location"...and the current UK market is an exemplary embodiment of that axiom. Pick your spots...in the right area you'd really have to work to lose money....in the wrong area, you'd be fighting hard to break even. It's like swimming in a river....swim downstream and you'll be covering a lot of ground...swim upstream, and with exactly the same amount of effort you'll probably be losing ground. By picking the right area you have the inherent advantage of "swimming downstream".
At the moment, I would steer well clear of London. The risk/reward equation is just not favourable. You could make some money...but in my opinion you'd be swimming upstream....and why put yourself in that position?
The Southwest is a great place to live...but not a great place for the buy-to-let investor. The dynamic rental market that you need simply doesn't exist down there, no matter how nice a place it may otherwise be.
Liverpool...which is highly touted at the moment, is of little interest to me. The "Culture Capital" card is being played for all it's worth...but how many new jobs will that designation bring to the city? No new jobs.....no additional demand for housing. No additional demand for housing....stagnant prices and rents. Liverpool's a great city...and I'd much rather buy there than in London....but it's far from the best UK opportunity.
Small towns...and out-of-the-way villages, no matter how charming they may be, are strictly off limits. It's like the famous quote from the bank robber Willie Sutton when asked why he robbed banks: "Because that's where the money is". If you own rental property, you want to be where the people are....lots of them. That means cities. Large cities. Near, or better still in the centre.
In my opinion the best two places in the UK to buy rental property are Leeds, and even better still, Manchester. Leeds has a solid growth of business and jobs and a civic infrastructure that I believe will carry Leeds to further levels of appreciation.
Manchester is a special case. Some pundits have been opining recently that the glory days of Manchester are over.....that the big gains of the past several years can't continue. Well, perhaps not at the same outlandish pace as in recent years....but prices will continue to rise in Manchester over the coming years. Perhaps dramatically.
There are several very large corporate transfers in the works at the moment that will bring literally thousands of well-paid employees directly into the city centre. This will decimate the existing supply of housing...which can only do one thing to rents and housing prices. Many of these employees are being transferred from London, which may give you a partial clue as to why I'm not too keen on the London market at the moment.
Remember, the forces of supply and demand can not be denied or avoided. Try dumping 5,000 well-paid employees into the centre of any city and watch what happens to the prices.
Manchester also has a secret weapon, in the form of Howard Bernstein, the head of the Manchester City Council. I don't think the good people of Manchester know how lucky they are to have a leader like Bernstein working for them. He's a magnificent visionary, with a clear view of where he wants Manchester to go...and a fundamental understanding of what it will take to make it happen. Unlike a lot of the soppy, hard-Left civic leaders who run their cities into the ground...Bernstein fully understands the relationship between good jobs (private sector jobs) and the quality of life in the city. He's doing everything he can to bring those jobs into the city..and he's succeeding. This can only have one effect on rents and property values.
My company could be doing developments in any part of the UK, but we're concentrating our efforts in Manchester because we know where the market is heading there.
Anyway, I've written enough. If you fancy entering the fray of the buy-to-let marketplace...but don't fancy paying thousands of pounds as the price of admission, and would like to know you're buying a flat directly from the source, feel free to drop me an email with your details. If I get the feeling that you're someone with whom I'd like to deal, I'll contact you. You can come to one of our sites, meet me, put on a hardhat, and take a tour of the site. You can stand in what will be your flat in 18 months or so...and if you want to go ahead we've got some great mortgage brokers at our disposal.
I'll let you have my private email:
galt snipped-for-privacy@hotmail.com
Once we're in contact I'll give you the public information.