Summary:
3 bedroom house in Westhampnett
Listed for sale on 11/01/18 @ £250,000
Sold for £291,000 on 21/02/18
Rent = £1.250pcm
Last sold in 2008 for £270,000 (+8% in 8 years)
Yield = 5.2%
This is an unusual buy-to-let pick of the week for several reasons, the first being that you can't buy it!
You see, it was sold at auction this week for £291,000. But, I thought it was worth highlighting for various reasons regardless, as a bit of a training exercise.
Firstly, that sale price compares to a £250,000 guide price, which certainly caught my attention when it was listed last month. This means it sold for 16% above its guide price - an interesting stat to bear in mind when first glancing at the auction lot lists and their seemingly 'cheap' guide prices.
At £291,000 though someone has got themselves something of a bargain. That's not always the case at auctions and you have to be careful to set an upper limit that you stringently stick to. In this case though, the property had been marketed last year for sale at £360,000. A little patience really paid off here then! It's also only 8% more than was paid for the property some eight years ago and is actually less than the owner before that paid in 2003 (£302,500)!
With a rental figure of around £1,250pcm based on similar properties to rent nearby, that would result in a whopping yield of 5.2%. This figure is backed up by it having been marketed in November 2016 at £1,200pcm and in June 2015 at £1,295pcm. It's interesting therefore that this property has got both a history of being let, but also that the rental figure decreased from 2015 to 2016 - so it's not always a one-way bet. This is why re-evaluating the rent when re-letting, rather than just assuming you'll achieve the same or 'a bit more than last time', is so crucial.
It didn't take too much research therefore to ascertain that this property has been bought at a good price and will produce a good yield - a smart purchase with good upside and limited downside.
There are some downsides though; and they may be why it struggled to sell on the open market at what would be a fair price (£360,000) compared to similar properties nearby.
Firstly the layout of the property. Now, fundamentally you have excellent sized rooms; a kitchen/diner, large lounge and three double bedrooms. There's an en-suite to the master bedroom, double glazing and gas central heating. There's no garage, which is a shame, but two allocated parking spaces is reasonable enough. The issue is that the accommodation is spread over four floors - it's a townhouse on steroids! And that's not going to be to everyone's liking.
Perhaps more significantly than this is it has been concocted from a converted building. That produces two issues; the main one being that it is a leasehold property. Leasehold houses aren't particularly good news, full stop. But if it's on an estate full of leasehold houses (like the nearby Grange estate) this can be palatable. The Sadlers however isn't one of these such estates, with all the other houses on the estate remaining freehold, so this one stands out as being 'unusual', which is rarely a good thing. The associated ground rent and service charge is also a hindrance and takes the shine off that impressive rental return.
The converted building element also poses a minor issue in that the EPC is at a low 'D' level. This isn't an issue in regards to the forthcoming changes to lettings legislation banning the lowest levels on the EPC scale, but surely one day the rules will get more stringent and could suck this property into its mitts. I suspect energy performance will also be highlighted in the press this year and may be more of a factor when tenants choose where to live. As the property is leasehold, the more extreme improvements, such as wall and roof insulation, cannot be done without permission from the freeholder (that probably won't be granted).
In the short-term therefore someone has got themselves a great property at a great price. As ever though, in the long-term what appears to be a bargain on the surface may only be because of circumstances that aren't likely to get any better in the future.
It was on the market with Romans and full details can be found on Rightmove via the following link:
http://www.rightmove.co.uk/property-for-sale/property-63494194.html
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