Thursday 26 May 2022

Which buy-to-let property is right for you?

I was previously contacted by a retired couple who were moving to Chichester and wanted some advice. They were looking to invest in a few rental properties to supplement their pensions and had been to four local estate agents, who each had the ‘perfect’ property for them. Yet each property was in a different part of town and in various states of repair!

So, they asked me, which should they buy? To which my response was; it depends!

You see, we all have different circumstances and preferences, which call for a different approach to property investment:

- ‘Bargains’ can be elusive in and around Chichester as it is an area in high demand. Modest rental returns (yields average 3.2%) should, however, give way to better long-term prospects for capital growth.

- People seeking more rental income may want to look further afield where property prices are lower. Bear in mind though that these relatively cheaper areas may require more management, not rent as easily, nor provide such positive long-term prospects.

- Newer-build properties will require less maintenance and should attract good quality tenants. This type of property can give you a quieter life but at a higher purchase price, which will impact your initial rental yield.

- ‘Doer-uppers’ on the other hand can be great if you have the skills, time and money to inject new life in to a tired property. Buying the right property at the right price, with a sensible budget for refurbishment, could maximise your returns.

The retired couple had worked hard for the past forty years and now wanted the quiet life; with a safe investment that gave them a reasonable return. They had a good amount of capital to invest and did not want to undertake a project, nor spend hours chasing after ‘problematic tenants’.

In this instance I recommended they look at modern houses in and around Chichester, which should prove to be a good long-term investment. Well-kept properties will attract good quality, long-term tenants with fewer maintenance issues. They would be able to move people straight in and start earning a reasonable (4%+) return on their money.

Whilst it may not make them a fortune overnight it is a simple and relatively safe strategy, which is what they wanted. It beats the return from a savings account too!

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