Monday 31 August 2020

BUY-TO-LET DEAL OF THE WEEK: 4 bed house in Chichester, £525,000, 6.0% yield

Summary:
4 bed house in Chichester
Listed for sale on 11/08/20 @ £525,000
Rent = £2,625pcm
Yield = 6.0%

Having written about buying a developer's show home, I thought I'd bring a real-life example to this week's buy-to-let deal of the week.

The Shopwyke Lakes developer Cala Homes have a couple of show homes for sale on the development, including this four-bedroom semi-detached house priced at £525,000. They offer a 6% rental return for at least 18 months. As per the main article though, there are a couple of points to note:

Is the price fair?

The show home is for sale at £525,000 (https://www.rightmove.co.uk/new-homes-for-sale/property-95977706.html), whilst the identical neighbouring property is available for £499,950 (https://www.rightmove.co.uk/new-homes-for-sale/property-95675906.html). This suggests you may be paying £25,000 extra for the show home, depending on the level of fixtures and fittings i.e. perhaps they aren't exactly like-for-like? If you take that sum off the rent you'll receive over the 18 month period, the return would drop to just 2.8%pa.

What about at the end of the leaseback period?

The minimum period is 18 months, although my experience from show homes is they're always needed a little longer than anticipated. As such, for as long as it remains the show home you do get a fantastic monthly rent (of £2,625pcm based on a 6% return from the £525,000 asking price). When the developers leave though, you'll either want to sell the property or re-let it to 'normal' tenants. In the current market I'd expect you to do so for around £1,600pcm, meaning a rather less headline-grabbing rental yield of 3.7%.


The property is on the market with Cala Homes and full details can be found on Rightmove via the following link: 






Chichester rental valuation


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