The Credit Crunch and Property Prices
Since the credit crunch mortgage lenders have drastically changed their lending criteria, making it virtually impossible to make money from property.
Previously it was quite easy to buy a property, add some value to it (by refurbishing or decorating it) and then re-selling or letting it out for a tidy profit or a nice monthly residual income. Find a good property managment company like Simarc before you decide anything.
Things are really different now; lenders (the few that are left) require a 50-75% deposit on a purchase, a squeaky clean impeccable credit history and for the buyer not to be over exposed. So if you have, say, a few properties, you may be considered as a high risk because of the fear of over exposure (particularly as property prices are steadily going down in value) resulting in negative equity.
So let’s take a look at a scenario. Let’s say you want to purchase a property on a Buy To Let. The property costs £250,000, a deposit of between £62,500 and £125,000 will be needed. You may if you are lucky get a positive rental cash flow of £100 – £150 per month. Ahem, excuse me if you had a spare £62,000 or £125,000 lying around I’m sure you would put it to a much better use than to invest it for a measly return of £100 per month.
So the question is, what should one do?
Is there another way to make money in UK property in this current economic down turn?
What about buying a property, (since the prices are low at the moment), doing it up, renting it out for a few years and then selling it when the prices go back up?
Well, in theory that could work but property prices will most likely go down further before they go up. Economists are saying that even when the prices go back up they would perhaps only return to the prices of 2007, not only that it could take another 7 years before that happens anyway.
