Warren Buffet declares US property market stabilising

Warren Buffet has declared that the US property crisis is over.

According to Buffet's recent report, the US property market bubble was created by a number of years of over supply of new properties, where around 2 million extra homes were being made available each year when actual demand only required 1.2 million.

After a few years of over supply the US ended up with way too many houses.

And so the bubble burst. Prices plummeted and, according to Buffett, the US had to choose one of three possible recovery routes.

1. Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the cash-for-clunkers program,(the US version of our car scrappage scheme).
2. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers.
3. Reduce new housing starts to a number far below the rate of household formations.

Over the last few years the US has followed route 3, with this massive reduction of supply Buffet perceives a stabilising of property prices.

The Economist compounds Buffets view and now sees that US property prices are 3% below the long term trend.

This over supply is in stark contrast to the UK property market where we have not seen the same levels of over supply, and are still seeing new home building supply running at a deficit to demand.

Read more on Warren Buffets declaration in ThisisMoney

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It pays for landlords to be unfashionable

We all know that landlords are deeply unfashionable, but according to new data from Findaproperty the more unfashionable a landlord is, the better yield he can achieve.

Findaproperty have compiled a list of the top 100 yielding areas for BTL property investments.........and in at number 1 with a bullet is the deeply unfashionable ......Blackpool.

Here's the top ten BTL yielding areas.

1. Blackpool 5.34%
   
2. Kingston upon Thames 5.26%
   
3. Kirkcaldy 5.19%
   
4. East London 4.99%
   
5. Manchester 4.87%
   
6. Durham 4.86%
   
7. Romford 4.72%
   
8. Uxbridge 4.63%
   
9. London South East 4.62%
   
10. Sunderland 4.55%
    

I remember trying to find a restaurant in Blackpool about ten years ago, god it was grim, I felt more fussy than Michael Winner, is it any better these days?

Read the top 100 in Thisismoney

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LESSON 3 - I'm unsure about my prospective tenants

I’m unsure about the tenants......

What should I do?

After the vetting and referencing of your tenants you may still have doubts. You don’t want to turn them away and risk a prolonged void period but equally you don’t want tenants from hell.

There are varies methods that a landlord can take to safeguard themselves. Firstly if you are concerned about the tenant stop paying because of financial hardship such as sudden unemployment then you could consider taking out rent guarantee insurance.

This will ensure that a landlord still receives rent to pay your mortgage costs even if the tenant can’t afford to pay. The cover should be enough to either allow you to then gain possession of your property or for the tenant to get a new job and start paying the rent again.

No or poor credit reference?

Some tenants such as student tenants will have a very limited credit history and this could lead to a very low credit score; leading to the referencing company recommending that you do not let your property to them.

Often once you have met a prospective tenant you can make a judgement as to whether they will make good tenants and you will be able to get along with them. If you think they may be a good bet but their reference is not up to the mark; then you should use a guarantor.

A guarantor is somebody of good financial standing that promises to stand behind the tenant in the event that they stop paying the rent and leave the property owing you the landlord money.

To find out whether you should use a rental guarantor then have a look at this recent article.

If you need rental guarantee forms; then you can now download them for free from the Property Manager.

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Time for a double dip?

A double dip is looking more and more likely, so landlords might need to think twice before dipping their fingers back in the property market.

Mervyn King has warned of further property price falls as quantative easing starts to hit the pound.

Recent results from the property market from the HM Revenue & Customs data showed the number of houses bought and sold in January fell to the lowest levels since February 2009.

Alongside this the Nationwide BS property price data showed its first fall in 10 months.

As QE comes to an end next year, mortgage finance could become more restrictive and as whichever Government if forced to cut public spending to start to pay it all back we will find that unemployment will rise and a double dip recession will result.

This double dip won't just make your mouth tingle.

Read more in the Independent

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Property price twitter - tweets on the streets

Property prices have gone up and gone down, dependent on which property price index you believe.

February see largest property price rise since 2007 - Bloomberg
Property market activity picks up - Press Association
Property double dip could be good news - Times
Property prices lose momentum - BBC
House price falls - Guardian
London luxury property continue to increase - Business Week
London sees biggest increases say Land Registry - FT Advisor


Fancy a double dip? It makes your tongue tingle!

See all the property price tweets

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LESSON 2 - Vetting & referencing your tenants

Once you have a set of tenants that you are happy with. Then you will need to vet and reference them to make sure they are not the tenants from hell.

You should always credit reference your tenant to make sure that they are not serial debtors.

A landlord should obtain an employers reference as a way of ascertaining their affordability of the rent. For example how will a tenant on twenty grand going to be able to afford to pay a rent of £1000 per month? This should set a landlord’s alarm bells ringing.

A great tip!

If you really want to ascertain the credit worthiness of your tenant – ask them for their last 6 months bank statements. This will immediately give you a great insight into your prospective tenant’s real financial circumstances. If they refuse – the chances are that they hiding something and you will be best off without them. Look out for irregular payments or excessive credit card payments. This could indicate a tenant is over leveraged and is struggling with too much debt or even a gambling problem. This isn’t going to be good news for the regular payment of your rent.

Do I need bank references?

Some landlords look to get a bank reference. To be honest it’s not worth the effort. Getting info out of the bank is like extracting blood from a stone. When the reference does arrive it will be couched in such no committal tones that it will not tell you anything about the tenant. Use instead my tip on the bank statements. This will be far more revealing!

A landlords reference will perhaps add a little bit more background about your prospective tenant but don’t necessarily rely on its’ accuracy. The reference may sing the praises of the prospective tenant. This may reflect their suitability. It may also be a sign that their existing landlord is dead keen on getting rid of them!

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