With interest rates now 3% higher than they were two years ago and likely to rise by another 0,5% in October, some residential buy-to-rent investors are now seriously considering selling some or all their units.
But, says Tony Clarke, MD of Rawson Properties, if it is at all possible, they should hang in there and bear the pain.
“Looking at Rawson’s large investor client base, some of whom own a dozen or more units, it is clear that those who have taken the long term view and ridden out interest rate fluctuations, have ended up in a very strong position.
“Although it is impossible to generalise, we estimate that most new investors in the middle and lower middle brackets under the new conditions still cover their monthly bond repayments in three to four years. Thereafter, their investments become steadily more profitable.”
Most rental agreements, said Clarke, still have a 10% per annum escalation clause and this quite often results in market-conscious tenants leaving within two years to find a cheaper rental – which is often possible with the new units still coming on the market.
“The good news, however, is that in Rawson’s letting portfolio, it has almost always been possible to find new tenants within a month or two – or to hold onto the existing tenant by agreeing to a smaller rental rise for a year or two.”
Clarke said that the vetting, selection and management of tenants is a specialist operation and in his experience is best left to experienced agents – but the basic soundness of investing in buy-to-rent property remains a proven fact, he said.
For further information contact Tony Clarke on 021 658 7100
or email: firstname.lastname@example.org