Do you really know what you get when you buy to let? That’s what ?I asked myself having discovered ?my tenant had fraudulently sublet ?my house.
Of course, that was just the start of the tale of woe. The rest involves a trashed house, a scammed innocent wanting her deposit and rent back, an attic full of cannabis plants, a legal eviction bill to pay and several thousands of pounds of rent arrears. And I am an experienced property investor. Woe betide this fate fall on those less equipped to deal with the less glamorous side of property investment.
But this is the business we’re in: people.
Property investors tend to forget this inconvenient truth when adding up the sums at auction. Property involves people. And therein lies the problem. People have problems. People create problems. Properties of themselves can develop problems – but never are they of the same magnitude as the problems the people who inhabit them can create.
And so I can’t help but wonder about the wisdom of George Osborne’s pensions overhaul, which in effect encourages older people to get into the “joys” of buy to let.
Of course, many pensioners may be rubbing their hands with glee at all the property they can now splurge their hard-earned dough on and will make a beeline for the auction rooms. But are they really ready for buy to let? Will this new generation of “gran-lords” find themselves overstretched? Because buy to let isn’t always the glorious walk in the park, paint-a-few-walls-and-collect-the-rent-as-you-go story the mass media likes to make it out to be.
Buy to let is damn hard work. And it’s stressful. It’s a business and there’s a dark side to every business. There are good customers and then there are bad customers – and that’s just the joy of being in business.
The business aspect is something many novice investors seem to have put aside. For now, with the exorbitant rise of the property market, newcomers can dream of creaming it in if they buy over-priced property now and sell tomorrow for a big, fat profit.
Well, good luck.
Banking on upward-only capital appreciation is one way to run a business. And I’m sure a lucky few who have got the funds for when the merry-go-round stops will do just fine out of this current market. For the rest? They’ll need all the luck they can get if there’s any truth in the rumours of repossession departments being dusted off.
Buy to let doesn’t just make you money – it also takes your money. I know that’s an unpopular truth that many investors like to sweep under the newly fitted laminate. But it’s a fact. Buy to let costs money if you’re going to get any sort of let from your buy.
Properties and the people who live in them go wrong all the time. And all of these problems cost pounds to put right. You’ll notice the “P” theme is pretty prevalent here. But the key take-out is that problems cost money – and problems happen. Often.
Add to that the time you need to sort out the problems and you’ve got yourself an explosive mix which the popular press have yet to feature in its “How I made my riches overnight in property” section.
But, of course, nobody likes the truth. Everybody wants the sexy, sensational stories; the “How I made a million in property” or preferably for some “How I lost the shirt off my back in property”. That’s just the nature of people: greed and envy all rolled into one.
But I do get the fascination – or perhaps obsession – with buy to let; who wouldn’t want to own an asset class so cherished by the rest of the population? Who wouldn’t want to swap stories of their latest buys, mammoth capital gains and soaring rent hikes? Who wouldn’t want to show just how damn smart you are to buy into buy to let.
But smart is not an easy choice. Buy to let isn’t just a conversation topic or a media feature. Buy to let is a proper business which needs proper business skills if you are to succeed. Buy to let can make you rich, but it can also make you poor. Owning property is not a lottery ticket to riches.
You can get lucky sometimes. The rest of the time it’s just damn hard work.
Samantha Collett is a private investor and author