Duncan Belton owes £4m in mortgages
In the last year alone the number of buy to let mortgages has doubled to just over 40,000. But should today's investors be buying more or selling up? BBC One's Real Story programme asked financial adviser Roddy Kohn to assess three different case studies.
Just five years ago Duncan Belton was counting coins in his local petrol station. He now owns 70 properties in the North East of England through buy to let.
His strategy is that he gambles on his houses rising in value, then releases the profits to buy the next one, creating a chain of properties.
He owes £4m of mortgages yet is confident he can continue to buy because all the loans are on low interest only rates. This means he does not pay back any of the debt in his monthly payments.
Mr Belton told Real Story: "It's a snowball effect. After three to six months I'll remortgage the current house which allows me to buy future properties.
Debt just covered
"I've taken big risks over the years but I think sometimes the biggest risk is not doing anything at all."
On paper, Mr Belton is a millionaire at 35 - but some money experts would advise against tieing up your money in property.
Leading financial adviser Roddy Kohn believes Mr Belton should sell up and cash in the profit.
"His income is only just covering the debt to lenders so if interest rates go up and property goes down Duncan's got a problem."
Just 100 miles away in Ripon, Yorkshire, another pair of investors are hoping for a golden future through buy to let.
Anthony and Maxine Stirk lost £60,000 on the last stock market crash but are desperate to invest in their next house.
The Stirks bought homes in the historic town of Ripon
Anthony told Real Story: "We had poor pension provision and had tried all forms of investment but usually at the wrong time. Buying property seemed the best thing to do."
Unlike Mr Belton, the Stirks did not remortgage their house to raise money but cashed £40,000 worth of shares. Over the next two years they bought a bed-sit, a one-bed flat, a two-bed flat and a three-bed house.
"Maxine has got housitis," says Anthony, "She wants to buy another six tomorrow."
But Mr Kohn advises that they buy no more properties, retaining their capital in case of future difficulties.
A hazard of the buy to let sector is a bad tenant, as Londoner Clive Hall has found.
He spent £80,000 renovating a £280,000 flat in the capital but is yet to make any money from it.
He lost £16,000 in just eight months through unpaid rent, legal fees and damage to property. But he is banking his future on the rest of his £1m portfolio of property in central London.
For Mr Kohn, selling up is the only way Mr Hall is guaranteed to earn himself a good pension.
"London prices have by and large improved so if he got out now he'd probably be better off."
Real Story: BBC One, Monday, 8 March, 2003 at 1930 GMT and streamed live on the Real Story website.
The opinions expressed are those of Mr Kohn and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.