I wish to answer a question emailed into me from a potential
Bingham landlord last week. Nice chap, lives in The Banks area, and it turns
out, after having a coffee with him, has a spare bit of cash
(now the kids have flown the nest) and wanted to buy his first buy to let
property.
His main question was ... Do I buy
a freehold house or a leasehold flat in Bingham?
Most people will say freehold every time, because you own
the land. However, it’s not as simple as that. The
definitive answer though is to research what it is that Bingham tenants want, within the area that they want. The tenant is ultimately your customer, and, if they
don't want to rent what you decide is best to buy, then you are not going to
have a successful BTL investment. So starting with the tenant in mind and working
backwards from there, you won’t go far wrong. Find the demand before you think
about creating the supply.
Leasehold flats and apartments in Bingham are excellent in
some respects as they offer the landlord certain advantages, including the fact
a flat can be initially cheaper to buy. Yields can be quite good, offering better
cash flow. The building will already be insured and yes there is a service
charge, but it’s still for a service at the end of the day and that cost is
spread between many others (i.e. when your freehold house roof goes, its falls
100% on your shoulders) and one of my favourites is that there is often no
garden to maintain or blown down fences to replace!
However, some Bingham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there are not many, but some Bingham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
However, some Bingham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there are not many, but some Bingham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
So what do the numbers look like? Well since 2003, the
average freehold property in Bingham (detached, semis and terraced) has risen
from £115,468 to £236,654, a rise of 105% whilst the average Bingham leasehold
property (flats and apartments) has dropped in value from £130,363 to £117,000,
a decrease of 10%.
I was really interested to note that of the 5,595 rental
properties in the Rushcliffe Borough Council area that the Office of National
Statistics believe are either let privately or through a letting agency, 2,060
of them (or 36.8%) are apartments. However, there are only 4,972 apartments in
the whole council area (be they owned, council rented or privately rented), which
represents 10.8% of the whole housing stock in the area. This really intrigued
me that, quite obviously, there is a high proportion of Bingham’s leasehold
apartments/flats rented to tenants compared to detached, semi’s or terraced.
Every Bingham apartment block, every terraced house or semi
is different. Like I said at the start, the definitive answer though is to
research what Bingham tenants want in the area of Bingham they want. Demand for
town centre apartments, near transport links can be popular and can offer the Bingham
landlord very good yields with minimal voids. However, Bingham terraced houses
and semis, whilst not always offering the best yields (although sometimes they
can), they do offer the Bingham landlord decent capital growth.
My advice to the prospective landlord as it is to you is do
your homework. Another source of info many Bingham landlords use is me! What
many Bingham landlords do, irrespective of whether you are a landlord of ours,
a landlord with another agent or a DIY landlord, if you see any property in Bingham,
that catches your eye as a potential buy to let property, be it a terraced
house, semi or flat... email me and I will email you back with my thoughts
(although I will tell you what you need to hear .. not want to hear!)
No comments:
Post a Comment