Tag: Buy-to-let

6th June 2016

3 Bedroom Terraced House, Southgate West, Crawley

Isn’t it amazing how much better & more inviting properties look when the sun comes out !

Take a look at this property, a 3 bedroom terraced house in Downland Drive, Southgate West, Crawley which is being marketed by Williams Harlow of Banstead, Surrey at £275000. Here’s the Rightmove link for a closer look http://www.rightmove.co.uk/property-for-sale/property-54035092.html

6-6-16 Downland Dr

From the marketing photos the property looks to be in good condition and, in addition, also has a garage.

So what about the rental yield ?

Market rents for 3 bedroom houses in the Southgate West area of Crawley are in the region of £1200pcm to £1300 pcm and possibly even higher. Based on these rents and a For Sale price of £275000, the potential gross rental yield would range from 5.2% to just under 5.7%. We think you’ll agree, these rental yields are really quite impressive.

Do remember that one of the key markets for a property like this are families. Families often come with children & children often come with pets ! So if you have an aversion (in the lettings sense) to either children or pets, it’s probably best not to consider a property like the one here. On the plus side, however, families do tend to stay longer as they put down roots in an area & children get established in the local schools. Void periods i.e. empty periods between tenancies, should therefore be lower.

If you’re looking to invest in property in or around Crawley, why not give us a call on 01293 515588 for a chat. We have a wealth of experience & knowledge in the lettings business and can provide you with free advice to make sure you get the most from your property investments. Alternatively , just drop us an e-mail to crawley@northwooduk.com.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

12th April 2016

5%+ Rental Yield After Adding the Stamp Duty Surcharge ?

With the additional 3% Stamp Duty surcharge for second property purchases now set in stone, a number of property investors have been concerned about the effect on rental yields.

As we’ve argued previously, however, the Stamp Duty hike imposed by the Chancellor on the 1st April, has to be considered in the grand scheme of an overall property investment strategy – see https://wordpress.com/post/thecrawleypropertyblog.com/2740.  Most of the landlords that we know aim to keep their properties for the long term i.e. 10 years plus. This length of time is usually sufficient to “ride-out” the inevitable peaks and troughs associated with property prices. As one wag pointed out to me recently, however, it’s not the peaks that concern him……it’s more the troughs ! Point taken !

So, has the recent Stamp Duty surcharge torn the heart out of buy-to-let ?

From our perspective the answer to this question is currently no. Investment property is for the long haul, not just for Christmas – first mention of the C-word this year !  The 3% additional upfront purchase cost for buy-to-let investors is therefore more of an irritant than a game changer. Of course there are other tax changes that the Chancellor intends to phase in over the next few years, so advice from a qualified tax specialist is probably in order.

However, by way of an example, let’s take a look at a 2 bedroom flat in Southgate West, Crawley, that has just been advertised on Rightmove by estate agents Taylor Robinson. The asking price range is £210000 to £220000. Although the apartment block appears somewhat dated, from the internal photos the property looks to have been refurbished & maintained to a very high standard indeed. Here’s the Rightmove link for a closer look http://www.rightmove.co.uk/property-for-sale/property-53773372.html

Although the asking price for this flat is somewhat higher than similar properties that have sold recently, both the internal condition and seasonal effects of Spring on house prices have probably persuaded the vendors to try for as much as they can get – and why not !

Notwithstanding the higher price, 2 bedroom flats like the one we’re considering here rent for around £925 to £950 pcm. If, as a property investor you decided to add the additional Stamp Duty surcharge onto the purchase price to calculate your rental yield, you would get an effective asking price range from £216300 to £226600. Based on the rental values we’ve quoted, your gross rental yields would now effectively be around 4.9% to 5.3%. These yields are still slightly higher than the UK average at around 4.8%, as quoted for February 2016 by the Your Move and Reeds Rains Buy-to-Let Index – http://www.lslps.co.uk/news/house-price-index. Of course, if you can offset the Stamp Duty surcharge against any Capital Gain when you eventually sell, so much the better !

So there you go – it’s still possible to achieve 5% gross rental yields on Crawley investment properties, even if you add the Stamp Duty surcharge on to the asking price !

If you’re considering investing in property in or around the Crawley area and would like some advice on what & where to buy, please give us a call on 01293 515588. Our advice is free  and we’d love to chat “property” with you ! Alternatively, you can also e-mail us on crawley@northwooduk.com.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

 

 

 

 

 

 

20th February 2016

Seasonal Uplift in Crawley Property Prices

The daffodils are well & truly out in Crawley and, at the time of writing, we’re still only three quarters of the way through February !

20-2-16 Daffodils

As the weather warms-up & we move towards the Spring, buyers also begin to emerge from Winter hibernation. As a consequence, we start to see the annual pick-up in the housing market up and down the country.

Reflecting this increased activity in the housing market, the February 2016 Rightmove House Price Index (see http://www.rightmove.co.uk/news/February-2016-Property-Trends-Infographic) indicated an average month-on-month increase in asking prices of 2.3%. If this rise were repeated throughout the year, it would mean an annual increase of over 31% !

Well, I can hear you say, “that’s not going to happen, is it !” Our answer to that is …. you’re right, it’s not going to happen !

Nonetheless, however, the 2.3% month-on-month rise reported by Rightmove is indicative of the seasonal factors that provide a boost to asking prices everywhere, including Crawley.

As a number of our landlord investors know, seasonal factors are not the only effect behind the increase in property prices this year. One other important (and hopefully never to be repeated) factor, is the UK Governments proposal to increase stamp duty by 3% for those purchasing 2nd homes, including Buy-to-Let investors.

The Government has argued that Buy-to Let investors have been instrumental in pushing-up property prices, way beyond the reach of first time buyers. To contradict this, however, data released by the Council for Mortgage Lenders (CML), and reported in Landlord Today, (https://www.landlordtoday.co.uk/breaking-news/2016/2/first-time-buyers-outnumber-landlords-three-to-one) shows that although Buy-to-Let investors formed a large proportion of borrowers in 2015, they were in fact out numbered 3 to 1 by first time buyers.

Whatever the merits or otherwise of the Governments proposed stamp duty increase, D-day for the rate hike is set for 1st April 2016. So, if you’re currently in the process of purchasing a Buy-to–Let property, make sure it completes before April fools day, or you might be landed with more than just a silly prank for your efforts !

Some commentators have predicted that after 1st April 2016, demand from Buy-to-Let investors will start to dry up. As someone who does not own a crystal ball, I cannot guarantee this is going to happen – only that the argument seems plausible.

So what about the effect on Crawley property prices ?

It’s clearly too soon to see whether there will be a spike in actual prices paid up to April 2016. This information will probably not be available from Land Registry until sometime in the middle of May. However, a good indication of whether prices are starting to increase is to look at advertised asking prices. This is because an increase in asking prices usually translates into an increase in actual prices paid.

To get a feel for the seasonal effect on property prices, together with any rise associated with the imminent stamp duty increase, we’ve looked at asking prices for 2 bedroom flats at Crawley’s ever popular Commonwealth Drive development. Average advertised asking prices in the last 4 months of 2015 have been compared with those that have come on to the market since the start of 2016. The results are shown in the table below.

Table: Average advertised sales & rental prices for 2 bedroom flats at Commonwealth Drive, CrawleyTable 20-2-16* From Rightmove advertised prices    ** Rounded to the nearest £100

 

The table shows that the increase in average asking prices in 2015 compared with 2016 is £7900, or nearly 3.6%. So the price rise for the Commonwealth Drive flats in Crawley has been even higher than the 2.3% rise reported nationally by Rightmove.

As a property investor, one question to ask will be, if the increase in asking prices translates into actual prices paid, how will this affect rental yield ?

In order to give an answer to this question, we checked the average advertised rents over the same periods. We’ve then simply calculated the resulting yield based on advertised asking prices. The results are also shown in the table. As you can see, average rents, which have increased from £1006pcm to £1053pcm, have risen by 4.7% i.e. over 1% more than the advertised asking prices for the same period. The resulting gross rental yields (the right most column in the table) have also improved, albeit, slightly.

In conclusion, although we’re seeing the usual seasonal increase in property prices in Crawley (at least as far as the flats at Commonwealth Drive are concerned), there is also the possibility of an additional effect due to the imminent stamp duty hike for Buy-to-Let investors. Advertised rents have also increased at a higher rate, with rental yields nudging up a little as well.

Please do bear in mind that we can’t judge trends in the whole Crawley property market based on one set of data. Nonetheless it will be interesting to see just what effect the increased stamp duty hike will have on asking prices for flats at Commonwealth Drive and elsewhere in Crawley.

Post April 2016 of course, we’ll also be looking to see whether there are any signs of reduced demand for investment properties from Buy-to-Let landlords. Rest assured, we’ll be on the case just as soon as the information becomes available !

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

 

 

 

7th December 2015

3 Bedroom House, Tilgate, Crawley

Here’s a 3 bedroom house on Ashdown Drive, Tilgate, Crawley that has just come on to market with a guide price range of £260000 to £290000. Moore & Partners are the estate agents and there’s an Open Day on 12th December. So give them call if you’re interested. For a closer look now, however, here’s the Rightmove link http://www.rightmove.co.uk/property-for-sale/property-56472209.html

Ashdown Dr 7-12-15

The agents (Moore & Partners) indicate that the property could do with some updating. We’d agree with this, although from the pictures the house is presented in a neat and tidy condition. However, the green bathroom suite is a bit of a giveaway ! Of course, with your investors hat on, one key element you would need to have in the bathroom would be a shower over the bath. From the pictures and description, this appears to be missing. If you don’t change the bathroom suite (for a white one !), the minimum we would recommend is to make sure that there is a shower over the bath.

Please also check that the property has double glazing through out. It is mentioned in the description a couple of times, but in relation to specific windows & doors only.  A quick call to the agent will remove any doubts.

If you were interested in the property with a view to updating it, one question to ask yourself is how much is reasonable to spend on the remedial works ? Of course, there are no “hard & fast” rules in answering this question. However, we looked at a similar scenario in our previous blog of the 19th October 2015 and the analysis there can also be applied here. Here’s the link to the blog in case you want to take a look https://wordpress.com/post/thecrawleypropertyblog.com/274

In reality, any renovation project should be concerned with making sure that what you plan on doing is “reasonable” and “fits in” with similar properties in the area. To that end, similar properties in the Tilgate area that have already been updated are being marketed for sale in the £280000 to £300000 price range.  One property is up for sale at £295000, with a tenant in-situ. In terms of rental returns, however, properties like the one we are considering here currently rent out for between £1150pcm to £1200pcm.

If you consider a 5% rental yield as a benchmark return on your investment, these rents translate into prices ranging from £276000 to £288000 with an average of about £282000. Hence, spending £15000 to £20000 on top of a purchase price of £260000 to renovate the property would, in our opinion, not seem too excessive. Of course, the assumption is that the money is spent wisely and not, for example, on gold-plated taps ! One item that the selling agent hints at is the potential for off road parking (subject to planning consent). In our opinion, this would be something well worth considering if updating the property.

If you have your eye on a renovation project, be it to do up and sell or rent out, don’t hesitate to give us a call. We’d be more than happy to give you our opinion as to what would be reasonable to spend your hard earned cash on. Call us on 01293 515588 or e-mail us on crawley@northwooduk.com.