£60k to invest - Buy to let options or something else?
Discussion
Currently own a buy-to-let with my brother and father. For various reasons we might be selling it, but at this point I don't need my share of it to 'spend' on anything myself. I expect to get around £60k from the sale. Part of the reason for the sale is the breakdown in the relationship between me and my dad, so I'm not comfortable asking him for much advice (largely due to not trusting him).
I'm a little bit oblivious to most things financial and I'm looking for a bit of basic advice if possible. Having the buy-to-let, while it was managed by my dad with little input from me, was a fairly simple investment and something I'm keen to continue.
Option A) 2 x £90k flats locally, 25% deposit each as buy-to-lets with the extra money used to spruce them up a bit.
Option B) 1 x £180k property locally, 25% deposit as a buy-to-let.
Option C) Something else I've not considered?
On the surface, which would you choose or what would you ask me to consider in this position? My partner and I currently rent our home, but aren't ready to buy somewhere together to live in, so the plan is to invest this money for 3-5 years until we're ready.
Thanks!
I'm a little bit oblivious to most things financial and I'm looking for a bit of basic advice if possible. Having the buy-to-let, while it was managed by my dad with little input from me, was a fairly simple investment and something I'm keen to continue.
Option A) 2 x £90k flats locally, 25% deposit each as buy-to-lets with the extra money used to spruce them up a bit.
Option B) 1 x £180k property locally, 25% deposit as a buy-to-let.
Option C) Something else I've not considered?
On the surface, which would you choose or what would you ask me to consider in this position? My partner and I currently rent our home, but aren't ready to buy somewhere together to live in, so the plan is to invest this money for 3-5 years until we're ready.
Thanks!
Options A and B need a bit more work to determine which works best for you. What would those properties rent for? What is rental demand like for those types? Which demographic would each attract? Use Land Registry sold house price data to get an idea of how well those types have appreciated in the past.
I would tend towards a single property. In my area, that would result in better tenants, and slightly better appreciation, with only a very minor difference in gross yield. With 2 low end properties, you have 2 sets of possibly low end tenants, 2 boilers, probably 2 lots of service charges, and so on. You might smooth out voids a bit, but to me that's not enough reason. Where abouts are you investing?
I would tend towards a single property. In my area, that would result in better tenants, and slightly better appreciation, with only a very minor difference in gross yield. With 2 low end properties, you have 2 sets of possibly low end tenants, 2 boilers, probably 2 lots of service charges, and so on. You might smooth out voids a bit, but to me that's not enough reason. Where abouts are you investing?
blindspot said:
I would tend towards a single property. In my area, that would result in better tenants, and slightly better appreciation, with only a very minor difference in gross yield. With 2 low end properties, you have 2 sets of possibly low end tenants, 2 boilers, probably 2 lots of service charges, and so on. You might smooth out voids a bit, but to me that's not enough reason. Where abouts are you investing?
This is spot on. One more expensive property is likely to expect better quality tenants who cause less grief. Capital gain/resistance to a dip likely to be better with e more desirable property, too.blindspot said:
Options A and B need a bit more work to determine which works best for you. What would those properties rent for? What is rental demand like for those types? Which demographic would each attract? Use Land Registry sold house price data to get an idea of how well those types have appreciated in the past.
I would tend towards a single property. In my area, that would result in better tenants, and slightly better appreciation, with only a very minor difference in gross yield. With 2 low end properties, you have 2 sets of possibly low end tenants, 2 boilers, probably 2 lots of service charges, and so on. You might smooth out voids a bit, but to me that's not enough reason. Where abouts are you investing?
1-bed flats with £80-90k purchase prices tend to rent for ~£600 per month (we used to live in one very similar). My thoughts were to start with one smaller property, and once we feel "established" to go for a second. It also means no "eggs in one basket" scenario.I would tend towards a single property. In my area, that would result in better tenants, and slightly better appreciation, with only a very minor difference in gross yield. With 2 low end properties, you have 2 sets of possibly low end tenants, 2 boilers, probably 2 lots of service charges, and so on. You might smooth out voids a bit, but to me that's not enough reason. Where abouts are you investing?
We'll be investing locally to where we live in Bournemouth.
BoRED S2upid said:
What happens in 3-5 years when your ready to buy together? Do you then need to get this money back? Evict tenants, refurbish house or flats, sell and the associated costs... Or will a deposit be from other means?
Either deposit from other means (we're always saving month to month) or sell one of the properties.If you can definitely rent at £600 and buy at £90k, that's an 8% gross yield. Not many parts of the south will get anywhere near that. However, there's still service charge/ground rent and plenty of other expenses to factor in. It is generally the case that higher gross yields (above 6% or so) mean lower capital appreciation. So, use the land registry (free) to find all sold house prices for that street back to 1995. Download the file into Excel, calculate the annual averages and 12 month increases, and compare to the more expensive option, and to your local authority (use land registry house price index for this).
Understand the 1 basket thing, but what sort of tenants will the £90k flats attract? Sometimes one good, well maintained basket is a better option than 2 baskets that have been rusting at the bottom of a canal for 30 years and are full of seagulls.
Understand the 1 basket thing, but what sort of tenants will the £90k flats attract? Sometimes one good, well maintained basket is a better option than 2 baskets that have been rusting at the bottom of a canal for 30 years and are full of seagulls.
blindspot said:
If you can definitely rent at £600 and buy at £90k, that's an 8% gross yield. Not many parts of the south will get anywhere near that. However, there's still service charge/ground rent and plenty of other expenses to factor in. It is generally the case that higher gross yields (above 6% or so) mean lower capital appreciation. So, use the land registry (free) to find all sold house prices for that street back to 1995. Download the file into Excel, calculate the annual averages and 12 month increases, and compare to the more expensive option, and to your local authority (use land registry house price index for this).
Understand the 1 basket thing, but what sort of tenants will the £90k flats attract? Sometimes one good, well maintained basket is a better option than 2 baskets that have been rusting at the bottom of a canal for 30 years and are full of seagulls.
Just as an example, here's a flat at £85k also being advertised to rent at £550/month. We used to live in another flat in the same building and paid £595/month, but it was slightly nicer inside with a new kitchen/bathroom. It was less than a year ago we moved out.Understand the 1 basket thing, but what sort of tenants will the £90k flats attract? Sometimes one good, well maintained basket is a better option than 2 baskets that have been rusting at the bottom of a canal for 30 years and are full of seagulls.
To buy: http://www.zoopla.co.uk/for-sale/details/33915344?...
To let: http://www.zoopla.co.uk/to-rent/details/34566072?s...
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