Is St. Agnes Place a good place to invest in a Buy-To-Let?

I was speaking with a local landlord on Monday who invested in one of the Berkeley Homes apartments just behind The Hornet on the St. Anges Place development back in 2005. I was very surprised that the development is now over 10 years old (how time flies!).

As his rental property has always let consistently over the last decade, he is contemplating taking advantage of the recent change in pension rules, and investing in a second property within the development. He was keen to establish whether his existing property has attracted any significant capital growth, and also understand what yield could be achievable from a new purchase. I did some research yesterday and this is what we found...

Having trawled through the sold prices, we noticed that one particular two bedroom apartment has changed hands three times over the course of the last ten years. Originally purchased 'off plan' in 2005 for £204,250, the apartment was sold in May 2007 (just before the recession) at £230,000. The same property sold again in April 2013 at £244,000. This reflects a healthy capital growth of nearly 19.5% over the course of 8 years.

Looking at the broader picture, statistics illustrate that in the last 5 years alone, property prices in St Agnes Place (PO19 7TU) have, on average, increased by £36,009 (or 14.07%). Pretty impressive stuff.

In terms of 'let-ability', St Agnes Place properties are always in demand all year round, due to the proximity to the city centre, train station, and St Richards hospital. Many of the units also boast off road parking, which is a rarity so close to the heart of the city. However, as with all leasehold apartments, we do need to factorise service charges, ground rents etc into our calculations, as these regular expenses of course will impact the final net yield figure.

Two bedroom apartments in St Agnes Place have been known to achieve as much as £995pcm. However, let's take a more conservative figure of £950pcm, and an average sale price of £247,210 (in PO19 7TU). Based on these numbers a landlord can expect to receive a healthy gross yield of 4.6%.

Couple this rental return with year-on-year capital growth, we concluded that the development certainly lends itself as an attractive buy-to-let hotspot!

Buy-To-Let Deal of the Day

After having a browse through Rightmove this morning I noticed a very well presented two bedroom property that lends itself as a fantastic investment purchase.

Situated in Arundel Park (very popular residential estate to the East of the city centre, not far from the A27), this house offers two double bedrooms - ideal for a young working family, couple, or perhaps even a pair of professional sharers. The property appears to be nicely presented, with neutral pastel colours throughout, which is perfect for attracting tenants and naturally minimise's the void between completion of purchase and first advertising.  

Earlier this month we rented a very similar property to this (picture below), on just the second viewing in the very same street, at £825pcm to a professional couple on a 12 month tenancy. Based on these figures and a purchase at the asking price of £209,950, a gross yield of £4.7% is achievable. 

On the market with estate agents Bell & Blake it may well be worth arranging an appointment to view at this weekends 'Open House' event - http://www.rightmove.co.uk/property-for-sale/property-49532911.html?premiumA=true

House Prices in Chichester Rising

I was having a discussion last week with a local accountant, and the topic of Chichester house prices came up in conversation. It is fairly common knowledge that prices generally are on the rise, however I was keen to look into local trends versus the national average. The results of which were rather interesting...

Nationally, house prices over the last 5 years have grown by 6.69%. Compare this to Chichester (PO19), which has seen a far greater increase of 9.48% - almost a whopping 30% greater than the national average. In Lehman's terms, if we were to take a three bedroom house for example, you would be looking at spending £222,200 nationally. Contrast this to a three bedroom house in Chichester, which would currently set you back £325,900.

These figures beg the question - how does this impact the rental market? Well, interestingly enough, home ownership in Chichester is over 5% lower than the national average - implying a strong private rented sector. This certainly reflects reality, as we are finding that more and more applicants are registering for rental accommodation with us, particularly from want-to-be first-time-buyers who are struggling to meet the high property values, and have decided to rent as a long term alternative to buying.

Buy-To-Let Deal of the Day - 6% Yield Available Close to A27 Transport Links

Yesterday we talked about recent reforms that have created greater flexibility in terms of accessing pension pots, which could potentially be used to fund a buy-to-let investment purchase.

As a result, I had a call this morning from a landlord who lives and works in London, and is looking to invest in a rental property in Chichester later this year. He has a healthy cash budget of £150,000, and is looking for a property that will return him the greatest rental yield.

Having looked at various options on Rightmove, I was curious to see how far £150,000 could be stretched in Chichester, where as we all know - house prices are higher than the national average. I must admit I was expecting to find maybe a handful of one bedroom apartments/studios. However, I was rather surprised by one such property that stood out from the rest...

On the market with Cubitt & West estate agency, your £150,000 can get you a two bedroom, two parking space apartment in Caernarvon Road in the Arundel Park area of the city. Better still, the property looks in decent order throughout which will minimise any voids between purchase completion and your first tenancy.

http://www.rightmove.co.uk/property-for-sale/property-48179665.html

Arundel Park is a very popular location in the local lettings market, due to it's variety of property sizes (from studio flats, all the way up to four bedroom detached family homes) and close proximity to the A27.

This particular apartment should fetch £750pcm, and appeal to either a young working couple or two professional sharers - attracting a very respectable 6% gross yield.

Pension Reforms = Buy-To-Let Opportunity?

As you may have already heard, this month will see one of the most radical changes to pensions in almost 100 years. If you switch the television or radio on today you will no doubt notice the plethora or adverts from all sorts of players in the money industry, all seeking to earn fees/commissions from your new found ability to release your pension funds.

As of last Monday, if you are over 55 and have a defined contribution pension suddenly it appears that the world has become your oyster! Chancellor George Osborne said in his Budget: "This government believes in the principle of freedom. Individuals who have worked hard and saved responsibly throughout their adult life should be trusted to make their own decisions with their pension savings".

Now, instead of being being forced to purchase an annuity, you can take lump sums from your pension pot, in cash, and spend/invest it in whatever you want. No doubt this will see an increase in sales of Jaguars, Mercedes and exotic holidays, however one would expect that most people who have saved shrewdly all of the lives are unlikely to go too far off the rails. A particular attraction of the new reforms is that they present an opportunity for many pension holders to dip their toes into the property market and become buy-to-let landlords.

For those wealthy enough to muster-up a big enough deposit or buy outright, this is a very popular way to generate an income and potentially make significant capital gains in the longer term as house prices continue to steadily rise in the local area. Newly-flush pension savers might well jump at the chance to join the buy-to-let bandwagon, given that interest rates remain stubbornly low and stocks/shares can traditionally be quite volatile (notwithstanding the FTSE 100 recently hitting a record high)

Despite numerous schemes to help first time buyers onto the property ladder, numbers have not raised appreciably, yet at the same time, prices at the bottom end of the property spectrum are bubbling upwards. This means that the lower end of the property market is being dominated by buy-to-let investors, and as the wave of pension money washes into it, we can expect prices to rise further and first time buyers to continue to be thwarted. In this scenario, the only thing that will keep prices from increasing is if UK House Builders can dramatically increase the supply of new housing stock to balance demand. Given the volumes they would have to build per annum, this is highly unlikely.

Of course there is also the small matter of the forthcoming General Election to be settled, which I would expect will hold back any dramatic influx of pension money into the property market for several months at least. However, depending on the Election result, it is likely to be full steam ahead.

As with everything, there are naturally going to be pitfalls with accessing funds in this way. First and not least the large tax bill you could face for withdrawing all or large proportions of your pension pot which can easily propel you into the 40-45% tax brackets.  Seeking sound independent financial advice before committing is absolutely imperative.

No doubt you will find that all sorts of players in the property industry will be our in their droves eager to get their hands on your money, and as such would-be landlords will need to take great care to whom they engage with. Purchasing a buy-to-let property can be daunting and it's a decision with long term consequences. Apart from your own home, it is likely to your largest financial commitment. If you are considering investing in buy-to-let please give me a call on 07875957955 or pop in and see us at 12 Southgate, Chichester, and we'll be happy to give you balanced and impartial advice, and review the pluses and minuses of different locations, property types, yields etc.

Buy-To-Let Advice in a Nutshell!

Investing in new-build flats, old houses or purpose-built halls of residence and pods all have merit in different ways. It depends on your investment objectives, time frames and budget.

Before investing there are numerous things you need to research including – but not limited to – cash amounts, mortgages and rates, fixed costs (such as service charges in flats), potential repairs and improvements, furnishings, gross and net yields, plus likely returns on capital outlay.

Investing in a university town is good, especially close to the university itself. Always make sure that the property has sufficient bathroom and kitchen facilities to match the number of likely occupants.

Two bedroom properties seem to be the most popular, either houses or apartments, larger bedrooms are better than singles, good nearby transport links are also useful and double-glazing is becoming a requirement for most tenants. 

Location of the property is vitally important, The main drivers are access to train stations, good shops and restaurants. Local schooling can also be a factor.

The condition of property should also be considered. Tenants want dry, structurally sound properties in good condition (cracked fittings, marked walls, damaged appliances, grubby kitchens and bathrooms are all a turn off).

Think carefully about the size and layout of the accommodation too. Most tenants will dislike small living spaces & odd shaped rooms.

Also remember, tenants have a strong sense of rental values so the days of landlords setting the rent to cover their mortgage are gone and they must therefore buy wisely.

A BTL property should look good from the outside (kerb appeal). If the inside is immaculate but the outside isn’t, you will struggle to get people through the door.

Think about the age of the property. The younger the property, the less maintenance you will have. If you purchase a character property, I would strongly suggest that landlords have the gas and electric checks done on the property before Exchange of Contracts. If problems are found the cost of rectifying the issues could potentially come off the agreed sale price.

Have a great Easter Weekend.