Cash or dash? That’s the conundrum facing property investors, with those lacking liquid funds running out of options to keep their buy-to-lets in healthy profit. The financial landscape has changed again, begging the question: do I bail out my buy-to-lets with cash or exit the private rental market?
The answer may lie in the following figures. Inflation is stubbornly high, remaining at 8.7% in May, according to the latest data released by the Office for National Statistics. The Government’s target of 2% looks, for now, a pipe dream and the Chancellor has offered no crumb of comfort that he will intervene to help struggling households.
While the idea of a 6% base rate was dismissed earlier this year, it looks increasingly likely to become a grim reality as the year progresses, with the Bank of England announcing on Thursday 22nd June that its base rate would rise 0.5% in one go to 5%.
The news is especially bleak for landlords who will need to refinance in the coming months, with even the best buy-to-let remortgage rates close to 5%, and expected to rise when the full effects of the Bank of England’s action take hold.
So, are you one of the fortunate few? The cash-rich portfolio investors who are able to take decisive financial action during this turbulent economic outlook? This year’s Handelsbanken Professional Landlords Survey revealed 91% of large portfolio professional landlords are looking to pay down the debt on their portfolios in response to rising interest rates.
They are using their cash reserves to ensure their buy-to-lets are optimised in terms of the yield, reducing the borrowing figure on which interest is accrued at the same time. Others said they were waiting for opportunities to buy new investments at a reduced cost, as well as re-purposing assets.
The luxury of cash and asset liquidity is for the few but what about for the many? Unless you have money saved to pay down mortgage debt or to fund the diversification of your investment portfolio, you may be best off selling your residential buy-to-to lets and rethinking your investment strategy. Leaving the residential market is also a thought utmost in the minds of the 24% of survey participants who said they cannot afford to upgrade portfolios to comply with incoming sustainability regulations
While the cash-rich and experienced will explore investing in offices, shops, agriculture and warehouses, accidental landlords and the less proficient may focus on exiting property altogether. The thought is compounded by some head-turning returns from banks and building societies in return for cash deposits.
Some fixed-term cash ISAs are now beginning to return around 5% interest, while one regular savings account in June – offered by Saffron Building Society - tempted customers with a 9% interest rate.
For residential landlords, it’s now a duel - profit, yield, mortgage debt and mortgage rates versus interest rates paid on cash lump sums. LandlordBuyer can help buy-to-let owners with single properties and portfolios crunch the numbers to discover the winner. Is it time to sell property fast and reinvest the cash elsewhere or hold tight and hope for the best? Let us help you come to that decision.
Our property experts are available to give you advice and a free, no-obligation offer on any property you own, anywhere in the UK. Our cash offers give you freedom to reinvest quickly where the best returns can be found, with exchange in as little as seven working days, if required.
Contact LandlordBuyer today to explore your options.