Amongst landlord concerns about the slow recovery of UK property prices, experienced landlady and director of of Keys Mortgages, Lisa Orme advises: there are a number of things landlords can do but they all involve assessing the situation and getting real with yourself - there’s no quick fix once you decide to bury your head in the sand.
Some suggestions include:
- Employment outside of property;
- Expanding your services – manage property deals or refurbishments for other investors;
- Curb your spending (personal and property) – if that means getting rid of the sports car or downsizing your home so be it;
- Budget and monitor your expenses like a hawk;
- Improve cash flow – can you increase your rents? Can you offer added incentives or a new fixed term tenancy? Can you let to LHA tenants (although be careful of the changes next year)?;
- Manage your properties yourself to reduce management and letting fees;
- Convert single lets to Houses of Multiple Occupation (HMOs);
- Re-mortgage – whilst many people are on low base rate trackers, I am constantly surprised by how many are not. Speak to your mortgage adviser about the current products on offer – you may surprised at how low some of the rates actually are and with loan to values at up to 80%, things are not as bad as many make out;
- Re-finance – it may be better to pull out some cash as a reserve for tougher times now than not be able to later. Don’t spend it of course but placed in a decent savings account, it may help you out if times get tough;
- Insure against rate rises – it’s possible to take out an insurance policy to hedge against rate rises. You simply determine when you want the insurance to kick in and they’ll cover the payments over and above that point. Its nowhere near as expensive as investors believe it to be, for example: to cover £1,000,000 worth of interest only mortgages 2% beyond where they currently are (e.g. current rate 2.5% so insurance will pay anything over 4.5%) will cost just £262 a month (please confirm with your broker);
- Finally do talk to your lender even if you haven’t missed any payments yet. They don’t want to repossess, especially not in the current market. If they can help they will, and will help you do a portfolio review, determine a strategy going forward and a ‘what if’ should the worst happen."
A distinguished speaker and hands-on investor for over 10 years, Lisa also warned investors benefiting from the low bank base rate not to get too comfortable, stating: "preparation is key; it’s no good when rates rise saying ‘I never saw that coming!’ If that means selling some or even all of your properties then do it! If it also means not buying any more and consolidating them, so be it."
In the interview with Ruban Selvanayagam of PS Investor Services, other topics discussed include whether property today is only for the cash rich; newbie investing / entering the market with low cash reserves; the 'no money down' concept; tips obtaining mortgage finance in a challenging market; improving your credit rating for the buy to let lenders; the FSA’s ‘Mortgage Market Review’ and placing options on property. The entire interview can be read here.
