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by Peter Parsons
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The third group are the 'professional landlords' These 'buy to let' specialists make a living from purchasing property and renting it out to cover the mortgage. The difference between the mortgage costs and the rent is their profit. As an extra sweetener, if judged correctly, a pro landlord can sell a property and make a large capital gain, usually with good tax breaks. Anecdotal evidence collected by www.mortgagedown.com suggests a lot of selling activity from pro landlords around about 2002 to 2003, as they used good business sense to determine that property prices had climbed vertically to a point where only a crazy gambler would still hang on and 'let it ride'. The ones that exited are already in cash, and so looking forward to a crash, as it provides an opportunity to pick up new property at 'yields' that will make them instant monthly profits AND the chance for rapid capital growth sometime over the next 10 years. The ones that didn't exit are in the business for yield, and so the actual nominal price of their properties is of no real consequence to them (unless they are forced to sell up for health reasons etc). As you can plainly see, the pro landlord group WANT a crash - it's a new buying opportunity, unlike the current situation where flat or even negative yields prohibit the prudent landlord from expanding their portfolios.
Who is left? Two more groups. The fourth group is the amateur landlord, the 'BTL newbie'. Sniffing the scent of easy money, this crowd jumped onto the buy-to-let gravy train far too late in the boom, or thru inexperience or downright lack of aptitude for the game bought at ludicrous overvaluations, meaning their 'investments' had to be subsidized, and HAD to appreciate in value in order to justify the cost. Allegedly, the pro landlords sold to this group, often utilizing the service of 'Become a Property Millionaire' type seminar companies to suck in the gullible and get them to sign on the dotted line as well as contribute a few thousand for the privilege!. Anyone who bought a 'spare' property within the last 2 or 3 years falls into this group, and will be hurting badly by now. A crash will most likely wipe them out as they face decades of subsidizing tenants just for the chance to get their money back, plus all the hassle that goes with being a landlord (leaky roofs, service charges etc etc etc). |
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