resale not new build
Hi Lysos,
You're definitely right about looking at a resale rather than new build at the moment. (the Manchester properties we were talking about were resales by the way).
Financing is only available up to 75% of the price at new build at the moment and if you're buying wiht a delayed completion date there is very little security that you'll be able to finance it at the agreed purchase price.
Unless you can find a new build with a huge discount of 30%+ it's not worth the risk.
And going back to the original posting in this thread about locations to invest, I think that anywhere there is a strong, reliable rental market - particularly with potential for HMO properties - is worth considering.
Areas like Clapham in London are expensive, but prices are dropping pretty quickly now and rental voids are non-existent because there is so much demand.
My thoughts are that as long as you follow some basic rules you'll do ok:
- Take a long term view (5 years +)
- Stick to buying substantially below the open market value (i.e. around the point at which rental yields are hitting the 7.5%-9% mark)
- Look for positive cashflow from day one
- Buy in areas with well-established, strong rental demand
I appreciate these rules aren't exactly rocket science but I speak to a lot of people who are struggling with serious cashflow issues because they banked on using cashbacks and/or savings to finance deficits on rental income vs. expenses and have underestimated the impact of the rise in rates or had to deal with serious rental voids.
Unless you have substantial cash reserves, anything with negative cashflow in this falling market is a very risky strategy - the last thing you want is to be forced to sell up because you've run out money to service the debt.
Marcus
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