Is now a good time to invest?

[jamesbaxter2]

Im 19 years old, and on roughly £27000 per annum, my family are saying i should buy a house now and rent it out rather than save till im ready to move out.

Im worried about interest rates going up or house prices falling.
do you think now is an ok time to buy or not???
does anyone think prices will drop or rates will go up???

Thank you for any advice.

[P.Pilcher]

James - this is a very difficult question and I am sure that there will be many answers which conflict with mine, so you will have to use your own judgement. However IMHO we have seen an extended period of house price growth over the last few years driven by lowering interest rates, a shortage of housing and the now slowly expiring "fashion" of investing in property on a BTL basis for pension purposes. The latter includes me, but I invested before it became "fashionable" thus I enjoy a realistic income from my investment which has shown very significant capital growth.
Prices are no longer growing and are holding level or falling slightly and I think a very slow fall may well continue for quite a time. Interest rates have plateaued recently but it is anybody's guess whether they will rise again and if so when. A fall is unlikely in the short term. I would therefore suggest that you sit on your hands, learn as much about property purchase, renovation and letting as you can and not commence your investment until you see property prices definitely start to move ahead again. Rental returns are at present barely sufficient to support a mortage let alone the other costs of maintaining a rental property, thus unless you are prepared to get your hands dirty by buying below market value, renovating and selling on or buying a property and converting it to one for multiple occupation, considering BTL is at present unwise. When I started, annual rental returns were 10% of the capital value of the property. This is now nearer 6% but beginning to rise. At your age you have plenty of time so research carefully and have patience. When the right time for you to buy property returns, you will have saved up much more capital to facilitate your purchase which will ease your finances.

Best of luck

P.P.

[dazalock]

hi mate

The question is how long is a piece of string. To gain peoples thoughts on the matter, try the forum on www.thisismoney.co.uk, under mortgages and homes. There are very long threads on this. The only thing I would say with BTL, especially getting into it at the moment, you need a pot of cash for the just in case's. Recently I had to invest a further 2K to replace windows in one flat where the tenant was complaining of cold. If I didnt have the cash to do it, I could leave my self open for some legal headaches if the guy got ill.

[Steve Charlton]

Hi James

Buy to Let is a risk like any other investment so careful financial planning is the key. Most lenders will now offer an 85% BTL mortgage, provided the rental income is enough to service that size loan. This means that you can leave the lender with more of the risk, since they'll be providing most of the cash to let you purchase the property you have in mind. I totally agree with Dazalock - whatever you have in the bank as deposit, hold back about 25% of that for the "just in cases". Use the other 75% as deposit on the property but research the area first and find out what the area's tenants are looking for. That way, you won't wait very long for tenants if you buy the type of property which is most popular and increased demand may mean you have a bidding war from prospective tenants offering more than what you're asking for! I do see what P Pilcher is saying, although waiting too long to get started may mean that you kick yourself in the long run if you miss an opportunity.