I had an interesting email from
someone in Huddersfield a few weeks ago that I want to share with you (don’t
worry I asked his permission to share this with you all). In a nutshell, the
gentleman lives in Newsome, he is in his mid 60’s and still working. He has a
decent pension, so that when he does retire in a couple of years’ time, it will
give him a comfortable life. He had recently inherited £110,000 from an elderly
aunt. One option he told me was put it into a savings account. The best he
could find was a 2 year bond with the Post Office which paid 1.9%; meaning he
would get £2,090 in interest a year. One of his other options was to buy a
property in Huddersfield to rent out and he wanted to know my thoughts on what
he should buy, but he had concerns as he didn’t want to take a mortgage out at
his time of life. He was also worried about all the tax changes he had read about
in the papers for landlords.
Notwithstanding the war on Huddersfield
landlords being waged by George Osborne, the attraction of bricks and mortar
endures for many. As our man is a cash buyer, he would not have to deal with
the intricate cut to mortgage
interest tax relief that will diminish, or even eradicate,
the profits of many Huddersfield landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good
negotiation techniques, that could soon be mitigated.
I told him that buying a Huddersfield
buy to let property is all about the total return on investment. True, he could
put the money in the Post Office bond and receive his interest of £2,090 a year
or, as he rightly suggested, invest in property in Huddersfield. The average
yield (yield being the equivalent of the
interest rate on the property) at the moment in Huddersfield is 3.27% per
annum, meaning our potential F.T.L (First Time Landlord) should be able to,
depending on what he bought in the town, earn before costs £3,597 a year. (However, I told him there are plenty of
landlords in Huddersfield earning half as much again (if not more), if he was
willing to consider more specialist investment types of properties – again, if
you want to know where – look at my blog or drop me an email).
The bottom line is that the
success of investing in Huddersfield buy to let property versus a savings
account with the Post Office (or whatever Bank or Building Society is offering
the best rate) will depend on the performance of those assets. Unlike with a
savings account, with property the capital you invested can also go up (and
yes, it can go down as well – more of that in second). Property values in Huddersfield
have risen in the last twelve months by 3.2% meaning, that if our chap had
bought a year ago, not only would he have received the £3,597 in rent, but also
seen an uplift of £3,520 …meaning his overall return for the year would have
been £7,117 (not bad when compared to the Post Office!).
..
but the doom mongers amongst you will say, property values can go down,
as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had
bounced back to their ’79 levels by 1984 and went on to grow an additional 58%
in the following four years. Then again, they dropped in 1988 and did take 13
years to reach back to those ’88 figures, but the following six years (between
2001 and 2007) they then increased by an additional 66%. Now, according to the
Land Registry, average property values in Kirklees currently stand 16.66% below
the January 2008 level, and anecdotal evidence suggests that in the nicer parts
of Huddersfield, we are well above these sorts of levels.
… and what would that £110,000 get
you in Huddersfield? A decent 3 bed terrace in Fattown or a decent 3 bed semi
in Deighton or a very nice 1 bed apartment close to the town centre .. in fact,
the world is your oyster. But which Oyster? Well, my blog reading friends, if
you want to read similar articles like this and what I consider to be the very
best of buy to let deals in Huddersfield, irrespective of which agent is
selling it, then you need to visit the Huddersfield Property Blog http://huddersfieldproperty.blogspot.co.uk/
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