Remember Repo Man, the cult 1984 Alex Cox film, about reclaiming a spooky car? Well, it looks like the eponymous hero might be back — but this time he is after bricks and mortar. House repossessions in Britain have reached their highest level for five years. If interest rates continue to rise, things could get worse, as mortgage repayments become tougher to meet. Court repossession orders are 22% above the level that they were this time last year.

But while owner-occupiers might view the next few months with trepidation, are property investors preparing for a bonanza? Er, not exactly.

Philip Stewardson, a West Midlands landlord who owns more than 60 buy-to-let properties, knows a thing or two about repossessions. He has bought 20 of them over the past five years and has come across a lot more recently.

“I’ve noticed a number of new-build flats coming to auction which must be repossessions,” he says. “And agents have offered us properties that we know have been repossessed. I was speaking to an official receiver last week who had 90 properties to dispose of.”

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Stewardson is buying targeted properties in Black Country hot spots, that were sufficiently down-at-heel to allow him to add significant value to them. By definition, a repossessed home is not going to have been done up before going to market.

Total refurbishment added, by his estimate, as much as 40% to their value, as well as making them suitable for the rental market. “The first ones I picked up at about £50,000 and spent about £25,000 on them,” he says. “They are now worth about £175,000.”

Why did he stop buying them? “It wasn’t a conscious decision, but it is rare, frankly, that we pick up any residential properties for the portfolio. We are now doing ‘convert to let’, with old commercial buildings, which we find offers a much better yield.” Also the grim state of many repossessions was a disincentive. “For some reason they all seemed to have botched DIY work in them, and we have to compete with the ‘Changing Room’ set of property buyers, who are desperate to buy something derelict in order to tart it up.” Furthermore, there was a psychological downside. “It’s like entering the Marie Celeste,” he says. “The beds have been left, still made up. Toys are scattered about. However, on the positive side, the owner is held responsible for the debt, and interest on it, until the property is disposed of. So by buying it you are at least giving them closure.”

Not that everyone takes such “closure” with equanimity. He recalls one case of a house requisitioned by the bank that the previous owner broke back into and squatted. Another returned between exchange and completion, and smashed up the entire house.

Peter Jones, a west London landlord who runs a £10m property empire of about 25 houses and flats dotted around the country with his twin brother Matthew, agrees repossessions are not as attractive as they once were.

“Banks are obliged to take the maximum offer for a repossessed house, so if someone comes in at the eleventh hour with a few pounds more, you are dumped,” he says. “You can waste a lot of time and effort trying to buy repossessions. They are assumed to be a bargain — often they end up being much less than one.”

Mark Cullen, Foxtons’ director for north and east London, says this is partly because of the much higher duty of care owed by the lender to the repossessed.

“Ten years ago there were a couple of landmark cases, where the lender had not allowed the owner to sell the house for a higher rate, and the case was thrown out in favour of the owner,” Cullen says. “Now, repossessions are handled very strictly, with numerous valuations, surveys and reports.”

Repossessions are subject to ferocious marketing, too, says Cullen. “A property must be advertised for a certain amount of time, and then even when you make an offer, the bank or building society must invite all other interested parties to make a subsequent offer. That brings every single potential buyer out of the woodwork.”

But what about buy-to-let investors losing their portfolios to the repo man? “Buy-to-let investors are well positioned in the market,” says Oliver Gilmartin, an economist for the Royal Institute of Chartered Surveyors. “Over half of them are over 45 years old. So they tend to have a bigger cushion of equity to release if repayments are a problem — and probably a larger personal income, so they can ride out higher interest rates.

“Landlords will still be squeezed by rising borrowing costs, even though rents have gone up over the past year at the fastest pace for four years,” says Gilmartin. “But with an expected 7% rise in property values, they will focus on their expected capital gain.”

So landlords will be okay. As long as they aren’t mortgaged to the hilt. Which you aren’t, are you? n Buy-to-let advice from Rosie Millard can be found online at www.timesonline.co.uk/investmentproperty

buytolet@sunday-times.co.uk

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