Friday, 27 February 2015

Why this might not be good time to get into the Thanet Buy to let market





The buy to let sector in Thanet, in fact the whole of the Kent buy to let sector is doing very well at the moment, but it can be a minefield. I could regale you with many stories where investors have got it tremendously wrong in Thanet, like in 2009 a four bed semi-detached house in need of improvement works  in Margate, which came onto the market for an asking price of £140,000.  There must have been a bidding war because the property sold for £145,100.  It sold again a few months ago for only £121,000, a drop of 17%. Interestingly, property values since the Summer of 2009 in Thanet have risen by 19.6%.
I have even seen some of those retirement apartments drop by 63.1% in value between the years 2010 and 2014 and a flat on Union Crescent which sold for less than when it was bought in 2005.  The thing is, I still see mistakes being made on a day by day basis in Thanet. You make even a small mistake, it could still prove very costly.
So what should you buy in Thanet? One option is Houses of Multiple Occupation (HMO’s). While they can be profitable, chiefly in the student market with Canterbury Christ Church University students, they can make things much more complex and costly, with the need for HMO licences etc. However, some landlords prefer the safer options with two and three bedroom modern town houses and semi-detached houses but these do not offer anywhere near as high risk as HMO properties but they certainly do appreciate in value alot quicker.  Every landlord has a different set of priorities when it comes to purchasing a buy to let property and that is why the advice I give is not a “one size fits all”. 
Mortgage rates on buy to let are really low at the moment and for the right property and person you can get rates below 3.9% if you put down a decent deposit of 25%, but the best rates are for deposits of  40% deposit, where I as type this, you can get a 5 year fixed rate buy to let mortgage from the Post Office for 3.65%. Also, the deposit will ensure you have plenty of equity in the property, if the property market stagnates in the future. The important thing to remember is the amount you can borrow is driven by the rental income, so it is vital you can identify a property with a decent yield that lets easily.
Finally though, if are investing so much time and money in building wealth for you and family, it is equally important for you to identify ways to protect it. Do not forget, if you spend years building a successful property empire in Thanet, when you pop your clogs, your family could face an inheritance tax bill of 40 %, which they would have to pay within six months of the death. In a buoyant market, selling in six months is not an issue, but what if the market was like it was in Thanet between 2008 and 2012, when things took seasons to sell, not weeks. Quite apart from losing nearly half of the assets you built for your family to the tax man, if they had to sell some your portfolio, possibly at a discount because the taxman wanted his money so quick, it might be wise to consider some life insurance that will offer protection against inheritance tax.
There are plenty of good advisors in Thanet that can help you with the mortgages and life insurance. We aren’t one, because we are a letting agent, but what we can help with is choosing the right Thanet property to buy. It’s in our interest to do so, because if we offer the best advice and opinion, you might consider (although there is no obligation) to trust us to manage the property. If you wish to discuss further please email me at a.munns@redstones.co.uk.



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