Property Represents a Fantastic Investment in the UK’s Newest City
The but to let market has come under the microscope in recent months. But choose wisely, and it still represents a safe investment with great yields.
When the government announced changes to stamp duty on buy to let properties in April 2016, there was widespread fear that it spelt the end of the buy to let boom. When the EU referendum result was announced, everyone said the UK property market would go through the floor. Yet here we are in mid 2018, and property still represents the best show in town if you are looking for a safe investment that will generate certain returns.
Of course, it is not all roses. The property market has certainly seen a few wobbles, and prices in London have plummeted over the past 12 months. It is therefore all the more important to consider the where, as well as the what, when choosing property as an investment. And according to one mortgage broker in Chelmsford, investors just can’t get enough of Essex’s county town, which is actually no longer a town at all, having been granted city status as part of the Queen’s Diamond Jubilee celebrations in 2012.
Entering into the buy to let mindset
Buying a property as an investment makes sense on every level, so the huge rise in private landlords should come as little surprise. The danger is that as homeowners, we can think we already know about buying a house, so we dive into it with the same mindset as when we are looking for a home for ourselves. Big mistake.
It’s one thing to pay attention to the neighbourhood and the decorative condition of the property, but your main focus needs to be on what sort of property tenants are looking for and what will generate the greatest yield.
For example, perhaps you can afford a two-bedroom semi in Great Baddow a couple of miles out of town that’s up at £250,000 and seems perfect. Sizeable garden, nice views across the countryside, good price, what could be better? Just think again, however. A two bedroom apartment in the centre of town will be far more attractive to tenants and will be in walking distance of the station. Better still, it will cost around £50,000 less and generate a superior yield.
What properties generate the best yield?
When someone is looking to rent, they have different objectives to when they buy, and these need to also enter your way of thinking. Tenants come in a variety of types, from young professionals, to low-income families who cannot afford a deposit to buy, to the “newly divorced” looking to start again. It is a case of choosing your target and buying accordingly.
The young professional market is a perfect area to look at in Chelmsford. You have the advantage of people with steady incomes who are unlikely to prove “difficult” as tenants, and there is a wealth of commuter-friendly property to choose from, including modern apartments and traditional terraced houses.
The average flat in Chelmsford costs just over £200,000 and generates a yield of around five percent, while a town-centre semi will cost around £350,000 with a yield of around 3.5 percent. Of course, most flats are lease hold and incur ground rent and management fees, so do bear this in mind.
Keep all these factors in mind, and remember to “think like a tenant” when you choose your property!