Where Do I Invest...?

A lovely lady came into the office this week to ask where to buy a rental property, and i’m always a bit flummoxed by this question. There are so many different variables that come into play with investing in property, what’s right for one person is another persons nightmare, there’s also that person’s budget, what they’re looking to achieve (cashflow, capital growth, pension, security, etc), if they’re buying cash or getting a mortgage, etc, etc.

The short answer is that she needs to work out what her price range is, and this will help to decide which area(s) to look at. Once she has some idea of an area worked out, then we can look at properties for sale in that specific area and I can help spot any potential pitfalls, and help with an expected rental valuation. 

Let's look at two examples:

1 - I helped Mr R buy a property in a not-so-nice area (where i also own one), and his property has had an 8.82% gross yield per annum with no voids in four years, and it’s increased in value by around 23% since purchase. This is a very good investment as far as numbers go, but some investors would not touch this particular area with a barge pole.

2 - Mr & Mrs X recently bought a property in a very nice area, which has a gross yield of 4.46% per annum. There will always be a very good demand for this type of property in this highly sought after area, and it’s in immaculate condition.

So... Property 1 obviously has a great return, but if there was a sudden downturn in the market then this one may prove difficult to sell. On the flip side Property 2 will be a lot easier to sell in any market if circumstances change and the owners need to sell in a hurry. 

In my opinion both are good investments for different reasons, it just depends which one is right for you and what your attitude to investing is like. I would really advise against getting too heavily in debt just to own a rental property, as the last thing anyone needs is negative equity and a negative cashflow each month if there’s ever a down turn. As it stands today interest rates are low, house prices are rising, rent prices are rising, more new developments and estates are being built, and employment is at an all time high! May as well make hay while the sun shines, just make sure your sums add up.

If you'd like a chat about investing in local property then please give me a call and arrange to drop in for a coffee, I don't do hard sell or flannel. Just straight talking, face to face honest opinion. My office is in The Rufus Centre, Steppingley Road, Flitwick, MK45 1AH - Tel 01525 838848 - Email graham@1st-house-lettings.co.uk  Website: www.1st-house-lettings.co.uk