Buy to Let. Back to basics.

At the risk of harping back to 'good old days', now is an opportune time to look at what worked in the past - and still does - and what works less well today.

The period from 1997 to 2007 is widely seen as a golden age for buy to let - from when buy to let mortgages became available to the onset of the financial crisis. During that time 60% to 65% mortgages were the norm, and interest rates were at levels similar to those forecast for next year. In effect, lenders imposed conservative borrowing on investors.

Those investors have done well. Although initial returns were modest, the passage of time has seen both rental returns and capital values rise to levels that would have surprised even the most optimistic of those early landlords.

The model worked. During that decade, interest rates both rose and fell, but the relatively low borrowing meant that investors' incomes rarely turned negative and grew steadily over the years.

Fast forward to 2010. The financial crisis saw interest rates plunge to historic lows. Lenders started to promote 75% and even 80% buy to let mortgages. A new investment model emerged. Now an investor could borrow four times his available capital. with the promise of exceptional capital gains. Interest payments were covered by rental income. And it worked. Until now. Rising interest rates threaten to turn incomes negative. Leverage certainly maximises capital gains, but it also amplifies capital losses. Many are heading for the exit.

Contrast that with the experience of the early conservative borrowers.

Many of those investors are now portfolio landlords - owning four or more rental properties. It is no coincidence that this group is not selling properties in the current climate - they are buying. Research by Ocasa, a major rental portal, shows that this group has increased their number of properties from an average of 6.9 each to 8.2 since 2021.

It is often said that you need four things to be a successful buy to let investor - a deposit, a mortgage, time and patience. Perhaps we should add another to the list - a conservative mindset.