Repossessions Offer Buy-to-let Opportunities

by : michael sterios

The buy-to-let sector is receiving a boost from the increasing number of properties being repossessed in the wake of steady interest rate rises. A growing number of people are offloading properties at bargain prices to stop repossession, and savvy investors are cashing in.

The Bank of England has increased the base rate five times over the past year. This has pushed the cost of borrowing up considerably. Buy-to-let investors and home owners who purchased property during the peak of the property boom in the early 2000s have had to face up to the fact that they simply cannot afford to keep the properties they bought during that period of time.

Several years ago the cost of borrowing money from mortgage lenders was historically very low. This lead to a boom in the UK property market and as a result property prices were high. Now that interest rates have increased, property owners are struggling to make repayments on the mortgages for the properties they own that they once believed would make them wealthy.

Because of this, many home owners and amateur buy-to-let investors are selling their properties at discount prices to avoid repossession.

Repossession can have long term affects on an individual's personal finances. It may be many years before the individual may be in a position to purchase another property, so it is inevitable that people who are in financial distress because of their properties will be open to almost any solution to stop repossession.

A solution that has become popular recently is to sell the offending properties at discount prices. Property owners who are in financial distress have become more willing to offload their properties at discounts in order to save themselves from accumulating even more financial problems.

Savvy buy-to-let investors have latched on to this opportunity and have been buying properties from over-stretched amateur investors in large numbers. In many cases, wide-eyed buy-to-let wannabes have paid heavily inflated prices for properties during the property boom of the early 2000s and are now selling them for around two-thirds of the price they paid for them.

While this may not seem like a good idea on the surface, closer analysis may reveal that the amateur investors are rapidly losing money by holding on to their investment properties either because they cannot find tenants, their monthly mortgage repayments have increased substantially, or both.

By selling the property at a discount, and possibly at a loss, the amateur buy-to-let investor may stop repossession of their property and avoid problems with obtaining credit in the future.

The more experienced buy-to-let investors, who purchase the properties in question at greatly discounted prices, are the obvious winners.