dothesums blog

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Following an article in the press yesterday (Sunday Times/home, 26th.April,2009 by Anna Mikhailova), I have been asked by three separate people today, is Buy-to-Let a business, or a speculative venture?

I think I know the point they are trying to make. Speculating in a commodity such such as gold, derivatives or turnips is one thing. Speculating in houses, other people's homes, is quite another.

I have a fairly simple test.

Speculators start with the property, often sight unseen, with little regard for the location and every regard for the price. They refer to 'Below Market Value' as a key feature and boast about 'no deposit purchases'. They often refer to 'distressed sellers'. Tenants are considered last, if at all.

Businesses start with the tenant/the customer, seek to satisfy his/her needs, will only buy where tenants want to live and often pay a premium for a property where occupancy will be high.

Both are looking for capital appreciation, but the business seeks customer/tenant satisfaction first.