Below
is an excerpt from the soon-to-be-published
“The Truth About Property Investing”
Blueprint.
#9. Finance is the holy grail
Once upon a time, there was a bank. It was called
Mortgage Express. It decided that it would be
a great idea to get into the Buy To Let market
in a big way and launched BTL Mortgages in the
late nineties shortly after the Assured Shorthold
Tenancy was introduced.
Investors flooded to the market place and many
companies joined the band wagon.
From
the mid-nineties through to the end of 2007,
both houses prices saw a huge surge in value
(typically £100,000 was added to the average
value of a house!) and finance was easy to get
hold of.
Indeed
I remember in my initial training as an investor
back in 2004, some of the advice I was given
then which in hindsight was reckless, unethical
and also downright dangerous. But such was the
availability of credit in the boom periods of
2003-2007 that it seemed any tom, dick or harry
could get it – and they did. Self-certified
100% mortgages were the order of the day and
a lot of people took advantage of this and maxed
out to the hilt.
I think the issue it served to prove was that
everybody was awash in a sea of good feeling
and euphoria that this bubble would just keep
growing and growing. Everywhere you looked no
money down deals were been advertised, banks
were offering customers crazy deals (anyone
remember the 3.99% fixed rate MX were doing
when interest rates were around 5.5%?) and everybody
was an expert. Or so they thought.
Come the crash of 2008 the whole banking sector
went down the swanny in a matter of months.
I still remember a rainy day in April when I
got the news that MX had pulled its bridge and
remortgage product. I remember looking at my
deal roster at the time and wondering what impact
this was going to have upon my business. Two
months later it was more than apparent at £1.15
million pounds worth of deals went down the
swanny; particularly gutting as this would have
added another £2.5K pcm profit into our
business.
Still,
this served a good purpose in many ways and
here is a list of some of them for you to consider:
1)
The current credit crunch (yes we are still
in one guys) means that finance is more difficult
to get unless you can prove it. In a way this
is good because it means that on average, you
need to earn £25,000 per year (not an
unachievable goal for most people), prove that
the rent stacks by 125% of the mortgage (ie
if the mortgage is £400, then the rent
needs to be £500) and you will need to
find a deposit of between 25-40% plus buying
costs of say 2-3% to cover all professional
fees.
