Overcoming the buy-to-let blues

Oxford property market: Signs that the property market may be picking up are prompting investors to think about re-entering the buy to let market. Lower prices, higher demand in some areas and favourable interest rates all contribute to making the market look more attractive than it was even six months ago, but Christopher Way, lettings manager at Carter Jonas warns about the pitfalls for those that don’t do their homework.

The first is financial. Interest rates on buy to let mortgages have fallen to an average of 5.88 per cent, compared with 7.01 per cent a year ago, which is good news for landlords with a variable rate deal. However, availability of lending is still pitifully low. According to The Council of Mortgage Lenders figures, as just 7,790 loans were agreed in the second quarter of this year; less than a quarter of those in the same period last year. Unless investors have a significant amount of personal equity for a purchase, it could be harder than ever to find finance.

Second is type of property. One of the biggest mistakes a landlord can make is buying the wrong type of property for the local market. Those that do their research will understand which properties are most in demand and invest accordingly. Taking advice from an experienced lettings agent is critical, even to landlords familiar with an area, as the market can change from street to street. In Oxford, for example, apartments are in higher demand than in other parts of the county as the city isn’t suffering from over-supply as much as elsewhere in the country. Also, the economic climate is prompting more people this year to take up postgraduate courses in the city, with the ‘knock on’ effect of creating even more demand for these types of properties.

Third is timing. Investors seem to have a natural instinct to try to buy at the bottom and sell at the top. In fact, the canniest prefer to look for bargains in yield by buying a property that meets the demand for the area and therefore attracts those quality, long term tenants. So rather than waiting until the market ‘bottoms out’, buying the right property now at a good price could achieve an impressive yield in the short term and, as the market really does pick up, be a winning investment in the medium to long term.