Friday 29 May 2015

How much of a minefield is the Solihull buy-to-let market?






The buy to let sector in Solihull (and in fact the whole of the Midlands) is doing very well at the moment, but, we warned, it can be a minefield. I could regale you with many stories where investors have got it tremendously wrong, like some modern apartments on the Waterside development in Dickens Heath, that were sold for an eye watering £335,000 in 2008, only to be selling last year for £227,500, a drop of over 32%. It is interesting to note that at that time in 2008 for £335,000, you could have bought a lovely three-bed semi in Knowle or a three-bed detached in Hockley Heath. In hindsight, an apartment for the same price as a decent semi, or nice modern detached house doesn’t quite stack up. 

So what should you buy in our part of the world? One option is Houses of Multiple Occupation (HMOs). Whilst they can be profitable, chiefly in the student market with Birmingham University students, they can make things much more complex and costly, especially with the need for HMO licences etc. 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% (although, the best rates are saved for deposits of 40% and higher). As I type this, you can get a 5-year fixed rate buy to let mortgage from the Post Office for 3.65%. It’s also worth remembering that a higher deposit will also 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 your 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 Solihull, 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 Solihull 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 of 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.

Whilst there are plenty of good advisors in Solihull that can help you with mortgage brokering and life insurance (we aren’t exactly one of those, since our specialty is property), what we can help with is choosing the right property to buy. It’s in our interest to do so, because if we offer the best advice and opinion and you make a decent profit, you might consider (although there is no obligation) to trust us to manage the property too. If you fancy hearing more, email me at jane.morcom@centrickproperty.co.uk .


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