Assetz® News - How to thrive in the crunch

How to thrive in the crunch

12th August 2008 |

According to so many analysts, there has never been a worse time to be in buy-to-let. Yet so many others, it seems, would disagree. Conflicting statistics for the value of property, availability of buy-to-let mortgages and the levels of rents and tenancy demand have added to the confusion.

In response to all this, the National Landlords' Association (NLA) has issued its list of the top ten tips to survive the credit crunch. It acknowledges that there are indeed potential problems that could lead to unwise investors seeing their ventures fail, but also many opportunities for success.

David Salusbury, chairman of the NLA, stated that there are "rich pickings" to be had at present for prudent landlords, although he said some of the stories of rising rents have been exaggerated. The key, he stated, is for landlords to take lots of advice: "Proper advice for landlords is critical. By following the NLA top tips, landlords could increase their chances of getting the most from their properties at a time when the wider economic outlook is not looking so good."

Some of the tips were related directly to this. Listening and learning to what other landlords know mattered, the NLA has stated. Other tips emphasised the importance of research into local markets, ensuring legislation is complied with and checking out tenants to ensure they are not bankrupt or people with chequered tenancy histories.

As well as this, it advised that establishing good and communicative relationships with tenants was crucial to avoid problems, along with the establishment of written agreements concerning tenancy deposits to ensure not just that these are deposited as required by law, but that no disputes arise at the end of a tenancy.

Finally, there is preparation, with ensuring insurance is in place where it needs to be, funds are built up for sudden emergencies such as urgent repairs and advertising for new tenants is carried out before existing tenancies expire, in order to avoid long void periods.

All these, it may be suggested, are sensible enough, but of course for many it would appear that the situation is sufficiently healthy anyway. PropertyWire reported today that the decline in the owner-occupier housing market has seen a boom in tenancies, with estate agency Your Move reporting a 38 per cent increase in the commencement of new leases in the year to June 2008.

The chief executive of the agency, David Newnes, attributed this development directly to the disappearance of 100 per cent and 95 per cent loan-to-value mortgage deals, which has held back first-time buyers and consequently increased renting. He commented: "Mortgage finance hasn't been this hard to come by for 15 years. For landlords this is a cloud with a gold-plated lining."

However, even here caution may come into play. One other tip issued by the NLA was to price a property a little below the market rate to ensure price competitiveness. This may be important because insurance firm Axa has warned that an increasing number of tenants are struggling to keep up with rising rents as other cost of living indicators continue to rise. This potentially creates the risk of arrears occurring, so pricing fairly low may be in the interest of the budgets of both the landlord and the tenant, both of whom will be keen to survive the credit crunch.