Bricks and Mortar – a safe haven for your money?

Whether you’ve created your own wealth or inherited, you could end up paying thousands for advice to create an income from your savings – but many savvy investors are now adding one or two properties to their investment portfolio and spreading the risk.“If inflation stays at 3% for the next 25 years, your £100,000 will only be worth £43,333”. Well that quote certainly caught my attention. Having bought my first property aged only nineteen, I can honestly say I’ve never looked back as over twenty years later, I have a great pension, even after paying tax. Of course buy to let mortgages are frequently discussed as commonly now as endowment v repayment mortgages were twenty years ago and I’m sure if you’re of my generation, you’ll recall the financial advice of the time. But although freely available, lenders now require in the region of a 25% deposit and often a costly arrangement fee. NatWest are currently offering a 2 year fixed deal at 3.49% with a £1999 arrangement fee, although you require a 40% deposit.

This Summer we have seen a positive increase in sales, particularly below the £250,000 range, not only fuelled by investors but also a re-emergence of first time buyers as parents are using equity release options to give their children the necessary deposit to buy. This ‘early inheritance’ method is quite beneficial for the young, not only could it be a long term good tax free investment, but the rental market is competitive  – Rightmove in the last twelve months has reported search activity for rental property on their website increased by 40% with the stock supply falling by 3%.

We have a great deal of information on our website for first time landlords, but I found the most interesting top 10 tips in a Telegraph interview with two former school teachers, Mr & Mrs Wilson who built up a 180 million property portfolio. With a common sense approach, they advise:

You are in the business to make money, not to help people

Property is an investment and a commodity. Don’t get emotionally involved with your tenants

Buy two or three-bedroom houses – and never flats

One-bedroom starter homes are no good as people want to move on within six months,” Fergus says. There is also limited demand for four-bedroom houses. “Why would anyone pay £1,300 a month in rent when they could get a mortgage for less?” he asks. “Rock-bottom rates have shifted the balance, but generally it should be cheaper to rent than buy.”

Buy new or nearly new

Avoid the cost and time spent doing DIY.

Choose your tenants carefully

Do checks to ensure they are creditworthy and have a guarantor who is a home-owner.  And the best tenants? “Middle age couples who have recently got together from previous relationships,” Fergus says. “They won’t be moving for promotion so are likely to stay a long time.”

Leverage your money

If you have £200,000 to invest, don’t buy one £200,000 property, buy two and put £100,000 down on each house, says Fergus

6 Magnolia wins every time

Avoid ex-council houses or bungalows

Buy close to home

All of the Wilsons’ properties are within 30 miles of their home

No smokers or mechanics – but dog owners welcome

These are personal preferences of the Wilsons, “but generally dog and cat owners tend to keep the house in better condition

10 Enjoy the experience of being a landlord

Caroline Eaton MNAEA