In this blog on whether now is the right time to purchase a buy to let, we shall be covering:

• What markers in the market you need to be aware of to predict what is happening 
• Where to find hard data on what a property is worth
• How not to fall into the ‘must buy now’ trap 

The question is are the valuations real and achievable?

I have been saying for months the asking price is not the base line that you want to make any decisions on. It’s the actual price that a property is sold for and, from an investment perspective, the rental that can be achieved is what you need to focus on when buying an investment.

This information is freely available to everyone – Rightmove and Zoopla obtain their data from Land Registry which can show you the last sold price in the area you are interested in. If you need to compare the size of a property you can source this information by looking at an Energy Performance Certificate on the register. This is free and you do not need an account to search. If you want to get a valuation regarding the rental, talk to a letting agent. With all this, you then you have all the right markers to tell you what the right price is that you should be offering. 

What does this show?

What this information shows me is that most sellers locally are achieving 12 – 15 % reduction on initial expectations. Logically this must be wrong because there are less properties up for sale. This is usually a driver for underpinning the market and inflated prices, but we can also see that properties are being set as subject to contract quite quickly on the portals.

Part of the issue is that some estate agents (not all) are giving high expectations to the seller to win the business as there is not a lot around. But what is really realigning the market is what is going on in the background – which is very difficult to see from an individual basis. 

Once an offer had been accepted, the power then lies with the mortgage companies. They will look at the risk and, possibly having learnt lessons from the build up to 2008, offers are being taken down at valuation stage. This is matched with putting more rigorous judgements on the purchasers ability to pay the mortgage which would explain what a local estate agent recently told me – that they are seeing an average of 23% drop out rate. 

Wait or proceed?

When things seem to move quickly it is very easy to fall into the trap that you need to move quickly to get on the ladder. Particularly if you have just come into an inheritance and you feel that bricks and mortar is a safe place to make that money work for you. However, you always need to remember you are buying an investment and the price you pay will have a fundamental effect on your long-term returns. With the change in stamp duty the market will no doubt go through a period of change at the lower end. 

And what about landlords?

The media says they are leaving the market in droves – not from our data!

There is no doubt that landlords who have held properties since the mid-1990s (when buy to let become a thing) are being tempted by the price that they can now seemly achieve. So, we are just seeing natural drop off of those who feel that it is the right time to exit. This is matched with the accidental landlords that joined the market after the crash 2008 (whose only option was to rent out property due to the situation) seeing the right time to exit.

The future of buy to let

The average length that our landlords are holding property is 22.5 years. I have always said that being a landlord is a long term investment. Hopefully we will get back to a more realistic feeling about the value of the property. There is no doubt that prices will always increase (we don’t have enough houses) and there will always be highs and lows in the market. You will never know if you have made a killer deal until it comes to selling the property or using the equity to do other things, but you can be assured that the overall trajectory is upwards.