I think the key phrase there is short term negative equity, as buy to let investments are always deemed medium-long term. And as for finding a bank to offer a mortgage to cash poor potential buy to let investors?

Here are a few 85% LTV deals for your perusal:-

A&L 2 year fixed with no arrangement fee 5.54%,
Birmingham midshires 5.79% 3 year fixed with no arrangement fee, 3 year tracker 5.95%

Please feel free to call fairman-financial (co.uk) for a free quotation

As you can see the actual cost of financing these low equity deals is not as high as you seem to think.

Also i agree that repossessed properties can offer a potentially good investment but that holds no relevence to our conversation about buy to let investments. Reposessed and auction bid properties are more often used as a "quick win" situation, doing a little work and selling on.

The key to a good buy to let investment is research, research, research.
Check *sold* property prices in the area (not 'on the market' prices!) for as far back as you can find. Do the same for rental incomes. Assess the inpact of previous times of property value downturn on rental income and properties *in that area* (by % of the contemporary market prices). Check location in relation to local ammenities, schools etc. Check what types of people are looking to rent in the area.

And most of all, find a good mortgage broker fairman-financial (co.uk)

Paul