Investors Switch Back to Flats (May 2014)

Every month we take on a few new properties that investors have just bought. In the last few months it's been noticeable that these are flats rather than houses. 

In recent years, many investors have opted for houses or other freehold properties - prices had dropped since the peaks of 06/07 and flats were considered less attractive due to the associated service charges and depreciating lease. 

But the recent upturn in property values since the Government intervened in the market in late 2013 means that the price of freehold properties have risen and that flats again are becoming the more attractive investment option. Yes, there are service charges, but when a flat now costs £20,000 to £30,000 less than a similar sized house, many investors are coming to the conclusion that even with the service charges, flats are the better investment. 

Take the following properties - which would both rent for £600 - as an example. The flat is fairly standard - there are plenty of them around. 2 beds, clean, modern, ready to move in. You can pick one up in the current market for £105k to £110k and a tenant will follow very quickly thereafter. The service charge will be about £1000 on an annual basis. Maintenance costs can't be guaranteed but should hopefully be lower as the building is newer and anything to do with the fabric is covered as part of the lease.

If you want £600 of income, the alternative would be a 2 bed house somewhere around town. The market has moved on these recently and something like this will cost you upwards of £125k in most areas of Northampton now, and over £140k in places such as Abington or Hunsbury. There's no service charge. Again maintenance cannot be guaranteed but you're liable for the fabric of the building which is likely to require more attention given the age of the building.

So the trade off is an extra £25k up front vs. an extra £1k per annum in service charges and with that considered it's fairly obvious why the more commercially focussed investors are now taking flats over houses. The logic doesn't follow for everyone though - a 2 bed Hunsbury house was recently sold to an investor by Harrison Murray for in excess of £150k, so there are some who will still pay the premium for what they consider is the right product. The general trend is interesting though - flats are enjoying a renaissance!

Facts about flats:

1. There's no shortage of demand - we can rent flats just as well as houses.
2. When the property market dipped in 07/08, flats were hit hardest, so there are more bargains around now.
3. The value of flats is affected by the length of the lease, but not until the lease gets down to about 80 years - most 'new build' flats built during the early 2000s have well over 110 years left on them.

SOLD Lovely East Hunsbury 2 Bed, £145k

Despite my attempts to get people to go after a more aggressive return, this type of property remains one of the most popular with investors.

This one is in really good condition and will sell for very near asking price I'd have thought. It will rent in the current market for AT LEAST £625pcm, and very probably more. It's a 2 bed house (freehold) and doesn't look like it really needs anything in terms of upgrading.

It's not marketed with ourselves, but interested parties, please get in touch.

Belvoir Rugby : Best Lettings Agent in the West Midlands

I'm going to engage in a bit of shameless self promotion today(!) as I'm pleased to announce that my Rugby office received the gold award for the West Midlands in the 'Best Lettings Agent' category, at the 2014 Estate and Lettings Agent Awards (ESTAS) - think Oscar's for the Property industry!

The really pleasing thing here is that the votes are cast by Landlord customers, which adds some legitimacy to the proceedings! We have about 20 direct competitors in Rugby and, we believe, around 4000 across the West Midlands, so to come out on top of the pile is no mean achievement.

Those of you that know me will appreciate I don't get too hands on in Rugby! Whilst I own a 50% share of the business, day to day matters are handled by my co-owner Rosie Callaway, who is ably assisted by Lettings Manager Wendy Hadley and Lettings Consultants Naomi Rowe and Louise Burns. The aim has always been to deliver service levels that are a cut above, and whilst we feel we're generally doing OK, it's really pleasing when feedback from customers is overwhelmingly positive - the team at Rugby deserve huge credit for the efforts they put in on a daily basis, and the award they have received. Pictured below are Wendy and Rosie with the award together with some gate-crasher they've clearly picked up along the way.

Properties With Tenants in Situ (May 2014)

Been away for a while, but we're back with a vengance with a summary of all properties currently available with a tenant in situ. We've built up quite a range here, and there are things to suit those on a limited budget and those who can spend a bit more. Equally there are things for people who will take a less fantastic area in exchange for a better return, and things for people who only like to buy in the nicer areas. Summary as follows:


If you can't see this, get a larger copy here.

A few notes to clarify:

Con
This relates to property condition. Clearly we can't be scientific, but to give you an idea an A property should be pretty nice inside and a C property will be pretty basic. 

Area
Again, different people have different views. But we've categorised every property has been given an area. C areas will be ex Local Authority and A areas will be generally considered to be the nicer ones in town. 

Yield
This is calculated on the straight forward 'rent times 12 divided into asking price' which most agents use to calculate return. Clearly this doesn't take in to account any of your likely costs so in our view isn't very realistic.

ROI
This is return on investment and assumes you are putting down a 25% deposit and mortgaging the rest. Importantly it includes all your likely costs too, so compares the rental income to the actual amount you've invested - money which would otherwise be in your bank account. Most serious investors agree this is a much more sensible way of calculating return, myself included. 

Happy to discuss any properties as required - richard.baker@belvoirnorthampton.co.uk if you have any queries.