Author Topic: Why Buy-to-Let is a bad idea  (Read 4479 times)

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The Prophet

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Why Buy-to-Let is a bad idea
« on: August 29, 2012, 11:39:14 am »
By-to-let is hot news at the moment.
Rents are rising but that can indicate that property is still too expensive.
Usually when the papers are suggesting anything is a good investment it is time to get out.
Buy-to-let might (after expenses) only just provide an income, Britain's property slump isn't over yet.

Gains made from rents may be vastly overshadowed as the capital value of your house falls.
Britain's house prices are 20% down since the financial crisis began.
History tells us that steep rises in house prices are always followed by equal and opposite corrections.
In the six years between 1989 and 1995 house prices fell 37%; wiping out all the gains made in the previous seven years.

If this happened again, house prices would need to fall a further 40% in real terms.
Not only would you be sitting on a paper loss of at least 40%, but you may find that rents are reduced.
Or worse - your buy-to-let is empty producing no income at all, as demand switches from renting to buying due to the new lower house prices.