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UK BTL Investing - Profit Or Loss

Jun 28, 2008
It's been all over the media that the UK property market is in decline and that prices will drop another 10% over the next 12 months. It's a lesson to us all that things can go down as well as up. But if you take a long-term look, property has always significantly outperformed the stock market when it comes to making money.

With BTL you buy a cheap property and then get tenants in who pay you rent which pays for your mortgage on the property and hopefully quite a bit more. Ten to fifteen years later the property has been paid for by obliging tenants and you can have a sizeable steady income from rent or you can sell the house or flat for a huge profit. Well that's the dream scenario.

Of course, because of the potential to make large sums of money a lot of people have joined the ranks of BTL investors. Now that the market has lost its buoyancy some of them are facing a less than rosy future. High interest rates mean higher mortgages. Rents however are not rising at the same rate and so now some tenants' rents are not fully covering all the expenses needed to pay for and maintain a property.

This probably all sounds like a very good reason to stay clear of buy to let property investing but if you're in the right position this may not be so. There's money to be made in speculation and often its big money.

So why might now be a good time to invest? Successful property investors know that a large part of their profit comes from the initial purchase of a property. The cheaper the property the more overall profit they'll make. Most inexperienced investors buy their properties at too high a price. This means bigger mortgages that cut into their profits as well as leaving them vulnerable to increases in mortgage rates.

Property auctions are now seeing a steep rise in the number of BTL and repossession properties. The more properties competing to be sold, the lower the selling prices you will see. You may think that no one wants to buy at the moment but just go to an auction. The numbers of people attending to buy will be down but those left will be the seasoned investor looking to reap the rewards of investing in a depressed market.

The market may be at a low ebb at the moment but seasoned investors are certain that at some point in the future it will start to rise. The UK has limited housing stock and people will always need somewhere to live. Add to that the British obsession of owning your own home and you have a housing market that ultimately always rises. Buying now means taking advantage of the bargain property prices.

Remember most of the people doing this at the moment are seasoned investors who have both experience and financial funds to fall back on if the dip turns into a slump. If you're financially secure and you're willing to speculate then this is the time to go to a property auction and snap up a bargain or two.
About the Author
If you have an interest in the UK property market please visit my property auction site which lists property auctioneers throughout the UK including links to North West property auctions.
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