Investors return to the market, but they’re a very different breed
Cash-rich investors are back, but what are they buying and where? Sharon Dale reports.
MAKING money from bricks and mortar was easy when property prices were rising and buy-to-let mortgages were plentiful.
But both professional and amateur investors disappeared almost overnight when the credit crunch was followed by the recession.
Now they’re back, tempted by distressed sales, some bargain prices and the hope that property will give them a higher return on their savings than the banks will.
They’re not just buying to let for the long-term either.
Some are tackling renovation projects and selling refurbished homes on for capital gain.
“Of the investors I deal with, half are buying to let and half are buying properties in need of renovation to sell on,” says David Phillip, head of Investor Services at Dacre, Son and Hartley.
“What we are seeing a lot of is people with money in the bank, some of them retired, who are looking to buy two or three houses.
“They aren’t earning much interest from the banks and feel that property could offer a better return.
“They’re looking for attractively priced repossessions or property at auction.
“Quite a few of these people are first time property investors
Gone are the investor clubs and the get-richquick guys from the South.
and if they’re buying with cash and not worried about mortgage interest rates going up, they’re happy with a four per cent yield on a buy-to-let.”
Other clients, who have bought to renovate and sell on, are hoping to make up to 20 per cent profit.
“The key to success is buying right and we advise clients on what work they might have to do on a property to bring it up to standard, how much they can expect to make in rents or re-sale,” says David, who believes that the number of distressed properties has risen in the last six months and believes that repossessions will rise again after the election.
Andrew Wells, of valuers and auctioneers Allsop in Leeds, says today’s investors are very different to those we saw at the peak of the market in 2004 to 2007.
He adds: “Investors buying now are cash-rich, they depend less on buy-to-let mortgage finance, partly because it just isn’t there or is too expensive, but also because the return they can get is now far better than cash on deposit.
“Investors today are more savvy. They have done their research and know what lets well.
“Gone are the investor clubs who bought city centre flats, gone are the get-rich-quick guys from the South and gone is the amateur who has spotted a bandwagon.
“Investors now are buying prime student houses but not fringe.
“They are also taking advantage of good tenant demand in city centres where prices can now deliver returns of seven or eight per cent.
“They are also buying family houses in good quality locations.
“Our February auction (UKwide) saw 90 per cent of the 355 lots sell raising £42m.
“Many of the lots were residential investment properties and this demonstrates clear demand for income.”
Former Property Woman of the Year Teresa Galley, an investor and lettings agent in Doncaster, agrees and says there is a feeding frenzy in the Doncaster area for certain types of property.
Teresa, who runs Galley Properties and has a portfolio of 30 lets, says: “Investors are buying again and I have noticed there is a big interest in HMOs, houses in multiple occupation or shared properties.
“There’s a shortage of that type of property and social housing isn’t meeting it.
“It’s not an easy rental sector to deal but the returns can be good.
“There are also people buying to renovate and sell.
“There are bargains out there and they are attracting a lot of interest. “It’s a good time to buy.” But Teresa, who is regional rep for NLA, adds a note of caution for novices who are investing for the first time.
“I’ve had quite a few first time investors who want to take their money out of savings accounts and put it in property and they’re asking for advice.
“It’s quite scary because they really don’t appreciate the scale of what they’re taking on with a buy to let.
“They haven’t factored in maintenance costs, the cost of voids and agents’ fees, plus they don’t have a clue about the legislation surrounding rental property.”
She adds: “They are looking at the market through rose-tinted glasses and they need a reality check.
“Property can bring financial rewards, but it’s not easy money.”
FEEDING FRENZY: Investor and agent Teresa Galley says there is new demand for certain types of houses in the Doncaster area.