Tag: potential to add value

30th October 2015

2 bedroom maisonette, Langley Green, Crawley

Here’s a maisonette in Langley Green, Crawley which according the agents, Fox and Sons, requires a little tender loving care. Well, we certainly wouldn’t disagree with them ! However, with a guide price from £200000, there may be some scope to add value and provide a good buy-to-let investment. Here’s the Rightmove link for more further details http://www.rightmove.co.uk/property-for-sale/property-37349547.html

LG30-10-15You may recall that we featured a Langley Green maisonette previously (16th September 2015 blog) which was in tip-top condition and had a guide price of £220000.  At the time rents for these types of properties were, and still are, in the region of £975pcm. All things being equal this gave a gross rental yield of around 5.3%.

If the property we’re featuring above were in a similar condition to the one in our previous blog, we would expect it to achieve a similar rent of £975pcm. Assuming that you could buy at the lower end of the guide price range, you can see that there is some room (perhaps even up to £20k) to completely renovate the property. Of course, if your renovation costs were lower, your rental yield, based on purchase price & renovation costs, would be even higher.

As we’ve previously mentioned, if you can move quickly on any deal, you may well be able to drive a harder bargain & hence get a lower price. This idea was also mentioned in todays’ FT ( http://www.ft.com/cms/s/0/b902e6e4-7e54-11e5-a1fe-567b37f80b64.html ). There’s also another aspect that might help you in your bargaining position if you went for this property. Can you guess what it is ?

The internal pictures of the maisonette show that, not only is it in need of a “make-over”, but it’s also empty! An empty property is one that is not earning money, or is perhaps costing mortgage payments to someone. So may be the vendor might accept a lower price for a quicker sale. Who knows ? But, if you don’t ask, you don’t get !

If you’re looking for investment properties in Crawley or surrounding towns, or have your eye on a potential buy-to-let and would like a second opinion, we’d be happy to have a chat with you. Just give us a call on 01293 515588 or e-mail us at crawley@northwooduk.com.

19th October 2015

Renovation Project  – Does it Stack Up?

3 bed semi, Three Bridges, Crawley

Here’s a three bed semi-detached house in Crabbett Road, Three Bridges, Crawley, in need of complete modernisation. The property is being marketed by Fox & Sons with a guide price of £260000 to £280000. If you can buy the property at the right price and take care not to overspend on the renovation costs, the property could be a good investment. Here’s the Rightmove link for more details: https://www.rightmove.co.uk/rmplus/property/showPropertyMcr.action?propertyId=37026873

Crabbett Rd 3 BridgesSo I can hear you asking, is it a good buy or not?

Well, there are clearly two aspects to this property from an investment point of view. Doing it up and then either selling or letting it out.  Let’s consider the property from the point of view of renting.

Assuming that you’re not a “slum landlord”, the property clearly needs a top to bottom revamp. You’ll also notice from the picture above that the house next door has off-road parking to the front and what looks a garage at the end of the shared driveway. In our opinion, both off-road parking and a garage would be highly desirable and would need to be factored in to any cost analysis. Remember that when these properties were built, families did not usually own more than one car, if that. Nowadays, however, many have 2 or even 3 cars. So providing additional parking/garaging space is, in our opinion, a priority to seriously consider.

One way of seeing whether an investment deal stacks up is to consider how much it would rent for. If we assume that the property is in “tip-top” condition, with additional parking etc…., we would expect it to rent for around £1200pcm (and may be a bit more) in the current market.

Now assume that the property achieves a sensible gross yield of say 4.5% to 5%. Based on the achievable rent and yield figures, we can now calculate how much the property should be worth. If you like, this is a “reverse yield” calculation, where we know the likely achievable rent and a sensible range of yields for the property type.

So, based on a 4.5% to 5% gross rental yield and a rent of £1200pcm, the value of this property in “tip-top” condition would be expected to be somewhere in the region of £288000 to £320000.

Does this range of calculated values for the property look sensible, or is it wide of the mark?

Well, looking at the Rightmove comparables there is in fact another property in Crabbet Road which was marketed at “Offers in Excess of £330000” by agents Mansell McTaggart. This property is now under offer – here’s the link https://www.rightmove.co.uk/rmplus/property/showPropertyMcr.action?propertyId=50464786. The Mansell McTaggart property, however, has a large garden & has been extended to give additional downstairs space and 3/4 bedrooms. However, like the property we’re considering, it also needs modernisation.  In our opinion, our calculated price range does seem to fit reasonably well with that of the slightly larger property advertised by Mansells.

Now for the final bit…. at last!

Let’s assume that the property we’re considering is now in tip-top condition and worth about £290000 i.e. towards the lower end of our calculated value range. If we bought the property for £260000, we would have in theory £30000 to play with in order to do the renovation work. If we spent any more than this, we may well be overspending and putting more money in to the property than it is worth. Of course, if the property once renovated were worth £300000, we would effectively have £40000 to invest in the renovation works, before we started to overspend.

Having completed our calculations and looked at the comparables for both sale and rent, the property appears to stack-up as a potential investment…. at least on paper.  If we were interested in going further with this property, we would now need to view it and see just how much money was needed to be spent, in order to bring it up to “tip-top” order.  For this we may also need to take trades people along to provide quotes for the work required.

If you’re looking for a renovation project, or want a second opinion on one that you have your eye on already, why not give us a call on 01293 515588 for a chat. Our advice is free. Alternatively, just drop us an e-mail to crawley@northwooduk.com.

25th September 2015

3 bedroom house, Southgate, Crawley

Here’s another “doer upper” for you to consider. A 3 bedroom terraced house, in Southgate, Crawley.  On at £250000 with local Crawley agent, Taylor Robinson, the Rigtmove link for further details is http://www.rightmove.co.uk/property-for-sale/property-51725176.html.

We’ve recently let a 3 bedroom house in the same area for £1150pcm. Based on this and the purchase price quoted above, you’d get a maximum gross annual yield of  5.5%.

SG25-9-15

However, realistically speaking if you buy this property you’ll have to spend money getting it into a lettable condition. From the picture above the curb appeal could certainly do with improving! Remember one of our lettings Mantras: Good / excellent condition gives higher rents and lower void periods.

In our opinion, the property would need a complete makeover with new bathroom and kitchen. Walls, ceilings, woodwork etc…should be repainted and then new flooring & kitchen appliances installed. If you spent £10k to £15k on the works required and then let the property for £1150pcm, your maximum gross annual yield would still be above 5%, ranging from 5.2% to 5.3%. Not too bad at all.

If you can negotiate the purchase price down, then so much the better. Don’t be frightened to ask for a price reduction and be prepared to walk away if your figures don’t add up. Another word of warning – keep a tight rein on the renovations costs !

If you’re looking for property investments in Crawley or would like a second opinion on a “doer upper” project, we’d be more than happy to have a chat. Give us a call on 01293 51558 or send an e-mail to crawley@northooduk.com.

24th September 2014

3 bedroom house, Gossops Green, Crawley

If you’re looking for a project with great rental potential, here’s a 3 bedroom house, just on today at £250000 with Blakemore & Sons. You’ll notice from the internal photos that the property could do with a makeover. Here’s the Rightmove link for a closer look http://www.rightmove.co.uk/property-for-sale/property-51687262.html.

By renovating / re-decorating a property like this you’ll have a much better chance of reducing void periods and also attracting the best quality tenants. Not rocket science if you think about it.

GG 24-9-15

Assuming that the renovation did not set you back any more than say £5000, you would expect to achieve rent of between £1100 & £1200 pcm. Based on a purchase price of £250000 plus £5000 to renovate, you should expect to get a maximum gross annual yield of between 5.2% and 5.6%. Not bad at all. Of course if you can negotiate the price down a bit, so much the better !

If you’re a property investor looking for your next buy-to-let deal, or perhaps new to this business and making your first tentative enquiries about investing in property, why not give us a call to discuss the different options in the Crawley area. You can also e-mail us on crawley@northwooduk.com.

23rd September 2015

1 & 2 bedroom flats, Southgate Crawley

You don’t see this very often. Two flats in the same development at Godolphin Court, Southgate, Crawley, both being marketed at the same price of £180 000.

One of the flats is on with Connells (http://www.rightmove.co.uk/property-for-sale/property-36567399.html?premiumA=true) and the other with Homes Partnership (http://www.rightmove.co.uk/property-for-sale/property-54868772.html).

The difference between the two properties is that one of them is a 2 bedroom flat “in need of updating”, while the other is 1 bedroom flat in what looks like pristine condition from the marketing photos.

Godolphin 23-9-15So, which one do you buy ? To answer this question, we have to consider a number of factors.

A one bed flat in tip-top condition at Godolphin Court should achieve £775 to £800 pcm. Based on a purchase price of £180000, this gives a maximum gross annual yield of between 5.2% and 5.3%.

What about the 2 bedroom flat ? Well, firstly we would not recommend letting it out in its current condition ! Let’s say for argument’s sake, however, we spend £10k on renovations & re-decorating, to bring it up to the same standard as the one bedroom flat. Now, 2 bedroom flats at Godolphin Court in excellent condition should let for between £900 & £975 pcm.  Based on these rental figures and a purchase price of £180000 plus £10k renovation costs, we would expect to achieve a maximum gross annual yield of around 5.7% to 6.2%. If you can get some money off the purchase price, however, your yield will increase still further.

So, by adding value to the 2 bedroom flat and bringing it “up to spec”, you can see that a higher potential yield can be achieved in comparison with the “ready-made package” of the one bedroom property. Of course, this is not always the case. You must be very careful when buying a property that “needs updating” that (a) you do not buy it at too high a price and (b) you do not overspend on renovation works. If you’ve ever watched TV programmes like “Property Ladder” you’ll no doubt have witnessed how easy it is to get carried away and overspend on the initial purchase price as well as the subsequent property renovation.

If you’re looking to buy property to let or develop in Crawley, or would like an independent opinion of your current property project, why not give us a call on 01293 515588 or e-mail us on crawley@northwooduk.com.