Buying UK property in a property slump, investing in property to buy to let hen the property market is depressed

When property prices start to fall, investors can be divided into two categories - winners and losers. The winners are the investors who have the balls to make tough decisions and the sense to make the right decisions. The losers are those who hesitate or are panicked into making mistakes. Investing in property is the same as investing in anything, timing and commonsense are everything.

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Right now there are a lot of property investors who got into the buy to let market who are in serious trouble. Many of these buy to let landlords got into the property market whilst prices were on the increase but got in too late. They say if you can see a bandwagon you have probably missed it and many investors got on board without considering the consequences of the property market slumping.

The gravy train had already left the station when they first entered the market and whilst they were busy buying property, the wiser and more experienced investors were cashing in because they could see the boom coming to an end.

• First time buyers
• Selling and moving
• Investing to sell on

Investors who were millionaires on paper three months ago are now looking at a property portfolio that has reduced in value by 10% or more. Many will have little or zero equity left in their property portfolios because of their high mortgage to value policy and within the next three months are almost certainly going to be looking at a negative equity running into many hundreds of thousands of pounds.

Millionaire to bankrupt in a matter of months and when you have high mortgage repayments to meet, property values falling by the day and rental incomes failing to meet your mortgage repayments, the debts mount up by the minute. Unable to sell their properties quickly, many of these property investors have their hands tied and will have no option but to hand the keys back to their banks.

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IS NOW A GOOD TIME TO INVEST IN PROPERTY?

The simple answer to this question is yes if you know what you are doing. Investing in property is the same as investing in any market. You buy at the lowest possible price and you sell at the highest possible price. Knowing when is the key and no serious or experienced investor will tell you they always pick the exact right moment.

There are two major mistakes that property investors who are in trouble as a result of this latest property slump have made. They have been totally blinkered with regards to the impending drop in prices that was looming and continued to buy property when the smart investor was selling. Plus, encouraged by the banks, they have worked off too small a mortgage to portfolio equity value, constantly remortgaging to take advantage of their property price increases and buying more property. So of course, when property prices fell, they had no margin of equity left to still show a profit.

Most of the property investors who find themselves in trouble now are those that have concentrated on the buy to let market. They are walking a tightrope between their rental incomes covering their mortgage repayments. Many are now finding that the buy to let market is too saturated and unable to rent a property for just two or three months can cause cash flow problems.

If you are going to invest in property now, you have to buy well, you need a fast turnaround on getting the property back on the rental market and you need to have a clear and safe get out planned. Your rental income needs to be competitive to encourage a fast letting and it needs to substantially cover the mortgage and then some. A small percentage rise in mortgage rates should not leave you exposed.

If you are moving into the property market for the first time, you would be best advised to work on a buy to sell basis until such time that you have made enough capital to start to look at buy to let by working off a high deposit, high equity portfolio.

So how do you go about buying property with a view to selling?

An extra bedroom in the roof or an extension can add 11-15% to the value of your property saving you a fortune on moving. By improving your home, you can save on:

• No conveyancing fees
• No removal costs
• No home information pack
• No stamp duty
• No estate agents fees
• Valuation and survey costs
• Furnishing and redecoration costs
• Far higher mortgage repayments

So how do you go about buying property with a view to selling it again quickly?