Property crash and how to make money by investing in property during a property crash * advice * safeguards and how to build a property portfolio without borrowing money

Property pundits are still arguing about whether or not a property crash is coming. Those that think it will never happen are basing their conclusion on the fact that demand is outstripping supply. It is true that new builds are not as high as what the government has said is required but wanting to buy is not the same as being able to buy. Most people would like to buy a Rolls Royce but few can afford one which is why they are not produced in their millions. The fact is that property prices are too high for most first time buyers to get themselves on the property ladder and even if a property crash were to wipe 30% off the cost of a property, mortgages are no longer going to be so easy to obtain.

Start of article about investing in property.

Previous page about building a property portfolio.

With the buy to let market bubble bursting, it is first time buyers that would normally keep the demand for property going but this isn't going to happen. The property crash is coming and first time buyers are going to be frustrated by lower mortgage income multiples and higher interest rates.

When the crash happens, it is going to be compounded by property investors going to the wall and dumping buy to let properties back on the market. Mortgage interest rates are likely to rise; not because the Bank of England will raise them but because the banks have got to claw back the money they have lost on their irresponsible sub prime lending. This will include buy to let property investors and borrowers with poor credit ratings who have fixed interest mortgages that are coming to an end. These sub prime borrowers will either not be able to meet the increased mortgage repayments or discover that they cannot remortgage with another lender. Subsequently, the property market is going to be flooded with hundreds of thousands of repossessions.

You would think that this may be a good time for first time buyers to get on the property ladder, but you would be wrong. Interest rates are going to be higher and mortgage lenders, having burned their greedy little fingers are going to be more cautious about lending and not so keen to part with money based on high income multiples. The days of lending five times income 95% mortgage to value have gone; at least for the time being until the banks forget their lessons of the past.

Property values increase when there is a demand that can be accessed and rental incomes are affordable. There will still be a lot of first time buyers with their noses pressed up against the estate agents windows but they are still going to find borrowing money very difficult. I envisage many of the estate agents who have sprung up in the last decade or so going to the wall and many of the larger companies having to close offices to reduce overheads. Certainly not good news for high streets and commercial agents.

INVESTING IN PROPERTY DURING A PROPERTY CRASH

As explained on the previous page, this is going to be the time for property investors to buy property at a discount with a view to future gains. If you can afford to buy property without saddling yourself with huge borrowings, you can afford to let the properties at a sensible rent. There is going to be a lot of this happening, pushing existing rental incomes down and compounding the problems of property investors who will already be struggling to find tenants or maintain the rents they need to cover their mortgages. The whole property market is going to go into free fall.

Property prices in some European countries are already beginning to fall, some parts of the UK are already feeling a down turn and if you are a property investor with a high mortgage to market ration, now is the time to cut your losses and look at getting back into the market when prices are near rock bottom.

All the major banks are looking at writing off billions in sub prime debts and they are not going to be keen to get back into the buy to let market without strong guarantees. The skill is being able to sell as near to the top as possible whilst buying as near to the bottom as possible and doing it without heavy borrowing.

If you have property that you cannot unload, if you can hang on, prices always return with a vengeance when the banks have to lend money into new markets.