Buy to let, flat or house?

[Dr Jekyll]

Relative is planning to buy a cheap (<£100,000) property, possibly needing fixing up, to let out.

Is a house or flat better? Houses tend to be less complicated to own but flats seem more popular with tenants. She won't e looking in a university town but somewhere property is very cheap.

[solo2]

I’m toying with the same idea but looking at maisonettes or houses as ideally looking for family tenants rather than childless.

Not sure though if feasible as I have no deposit to put down but my own home is mortgage free. Years ago I read that it was possible to buy and raise a mortgage on a rental if you had no mortgage on your own property but given the current situation due to COVID I’m not sure what lenders are doing. I’m in not rush and waiting to see what prices do after the stamp duty relief comes to an end as I hope prices will drop. It’s all a bit of a gamble.

Sorry to sort of hijack your thread OP

[croissant]

Doing the same here but actively avoiding flats as they're leasehold, with ground rents and service charges and generally seem to be more hassle

eta: leasehold properties are also more of a hassle to sell on with charges and form filling required from the freeholders. It was a massive pain when we sold a flat 5 years ago and it left a bitter aftertaste on the whole experience.

Edited by croissant on Tuesday 20th October 17:30

[98elise]

I avoid flats (leasehold to be specific) as you have no control over the cost of major repairs.

[MattyD803]

I've got a little 2 bedroom flat that I bought as part of my pension plan a few years back and there are certainly pro's and cons to each. I'm sure there are PH's out there who own both types, but from my experience, I have found the following with my leasehold flat:

Pro's

• For a set (low) purchase price, a flat was in a much better location for the rental market (closer to uni, town centre, train & bus stations and in my case the beach/marina area. I think this is a major reason why I have had zero issues letting my place at full asking price.

• For the reason above, my rental income is really quite good for the area. (Lots of potential tenant types seem to drive up demand).

• My flat has zero external space that needs maintenance by my tenant. Some may consider a downside, but flats rented to younger couples or students are unlike to have a lawn mower or shears etc. This'll potentially mean an overgrown garden and provide them somewhere to dump rubbish etc.

• Energy bills tend to be lower, as heat loss (on a like for like basis) will be less than running a house. Council tax also. Both good selling/letting points.

• Some people (females particularly) prefer the security of a flat, particularly one above ground floor level. (If near a uni or hospital, this might be a selling point depending on the type of tenants your likely to see).

• Taller blocks might also offer some nice views, depending on location. This could be selling point, say compared to a equivalent price mid terrace in a run down street.

• The maintenance (which I pay for) includes an onsite caretaker, who patrols the place and to a very basic level ensures my flat is kept illuminated, warm, dry, tidy and secure - which is good because I am 150miles away and have no eyes on the place.

• I know this depends on a lot of factors, but in my case, other than a hot water cylinder, I don't have a water tank or boiler to worry about as this is all centralised.

Downsides

• Maintenance Charges (these can be extortionate, especially if you have lift, concierge etc.)

• Ground Rent to pay

• Flats tend to be leasehold, the term of which will reduce year on year, potentially reducing the overall value unless you buy an extension.

• If leasehold, there are additional admin type charges when you purchase / re-mortgage / sell.

• You are the mercy of the managing agent or freeholder regarding repairs and upkeep depending on their inspections etc. e.g: My 1991 block just needed some structural work on the roof, for which my share was over £4k, which I only had a matter of months to pay.

• More potential for noise related issues (either way).

• Difficulties when moving furniture in/out if unfurnished. If furnished, a pain in the back side for you when setting up or replacing items.

Just my two penneth anyway, hope that's of use.


Cheers,
Matt

Edited by MattyD803 on Tuesday 20th October 17:22

Edited by MattyD803 on Tuesday 20th October 17:22

[Groat]

Flat? House? Shoebox on the motorway?

Makes no difference.

You can either do the magick or you can't

[nikaiyo2]

I dont think there is a right or wring answer to this and is very much dependent on where the property in question is,what is on the market and at what relative costs.

I always buy flats...

For me they give a better location for price and offer a different tenant profile to a house in a worse area.

Houses will return more, no question and if I was a full time LL I would go down this route. As my BTL are a side income/ pension I want low hassle and an easy out. I think flats in good areas will have a bigger market than a house in a grotty area.

[PistonBroker]

As others have said, a freehold house at least rules out the management company expenses.

Our opposite neighbour has a flat down the road she rents out and she's just been tapped for her proportion of the new roof on the garage block.

Which would be alright if her flat actually came with a garage! She's apparently taken legal advice and there's no getting out of it. Madness.

[Condi]

PistonBroker said:

As others have said, a freehold house at least rules out the management company expenses.

Our opposite neighbour has a flat down the road she rents out and she's just been tapped for her proportion of the new roof on the garage block.

Which would be alright if her flat actually came with a garage! She's apparently taken legal advice and there's no getting out of it. Madness.

How does this differ between leasehold and freehold? If part of the building needs repairs, and everyone is an equal freeholder, then all the freeholders will have signed an agreement to pay for it.

Your friends position is like the flat on the ground floor refusing to pay for a problem with the roof because it doesn't affect him!

The only advantage with a freehold flat is that you have a say over how the money is spent and no 3rd party is going to jack up the charges and give it to shareholders. Repairs still need to be made and the money for that comes from the owners of the properties.

[CzechItOut]

When I looked into this many of the flats I saw had gained little or no capital appreciation over the last decade.

[nikaiyo2]

CzechItOut said:

When I looked into this many of the flats I saw had gained little or no capital appreciation over the last decade.

Sure, but a good flat in a good location has doubled in value. There is nothing intrinsically wrong with LH.

To me leasehold is potentially a problem in very large developments (especially when roads etc are private) less so in a converted house with 4 or 6 flats. I would not consider a FH flat in a converted house unless there was a lease governing management and maintenance.

[matt3001]

CzechItOut said:

When I looked into this many of the flats I saw had gained little or no capital appreciation over the last decade.

The postcode dictates the value appreciation not the asset itself over that time period.

Manchester flats for example have doubled in price over that window.

[CzechItOut]

matt3001 said:

The postcode dictates the value appreciation not the asset itself over that time period.

I disagree. Houses next door to the same flats have grown significantly in the same time frame. Of course there are regional variations, but I was surprised to see how little the price had risen for many of the flats I looked at.

[Heaveho]

In my experience ( limited ), flats tend to provide a better yield.

[samajo]

It depends on your budget and needs. I personally know Americans who owned apartment abroad and use it as a rental property. I also want to invest in physical property but realize it could be quite riskie. That's why I want to consult with specialist first to make the right choice. I want to buy apartments for sale in istanbul and I have found local specialists with branches in Turkey.

Edited by samajo on Friday 27th November 12:51