Investment property loans

Whatever happened to getting a loan to buy an investment property with? They went out of the window with the world’s financial health when Lehman brothers bit the dust, that is what. The continuing devaluation of real estate around the world is continuing to put pressure on the loan markets and the credit crunch is still affecting property investment markets. The banks are well aware of the likely losses in the commercial property sector that are – as we speak – being announced. So, they are hoarding their money for the time when they must announce more losses and write off more outstanding debts.

Is is possible to arrange loans on investment properties, but you are going to need a substantial deposit and have a solid business plan. The days of the buy-to-let landlord with a 125% mortgage are over for the foreseeable future, and I would not consider even applying for a loan unless I could raise at least 25% of it first. Then – maybe a bank will talk.

This is a good indicator of the state of the market, and one also has to beg the question – who in their right mind would take on a mortgage on a piece of property that will fall in value in the short term? Simple – the actual value of the property makes no difference if it provides an income that more than covers the debt costs. But one thing is for certain – the days of flipping a property for a quick buck in a short time are all but over unless you have substantial cash behind you.

Some of the bulk sales happening at the moment are around 6-10% of the peak prices. Yes – that low – as much as 94% less than prices were just a few years ago. These tend to be in places where recovery will be extremely slow, but if you have cash available, I would consider looking at some areas of Miami, Las Vegas and Southern California for bargains. Although – only if you have cash, or can afford to make the loan repayments regardless of if the property is let out or not and – be prepared to be patient. Some of these area will not recover.

Investment property loans are not quite a thing of the past, but for the next two years, they are going to be in extremely short supply. The amount of investment property for sale is enormous and in places like Dubai, will perhaps never get sold. Dubai is extremely over built.