As you know I write regularly about properties that I think would make ‘good’ buy to let investments.
I always try to give you as much and as accurate information as possible about what I think the rental yield will be, pro’s and con’s of the property etc.
However, it is my opinion or assessment based on my experience and knowledge of lettings in the Dundee area. But not having physically visited the property in question this obviously is not going to be the complete picture, it wont include the cost of any updates/repairs, purchase costs e.g. legal fees etc.
Given the above I thought I would take the opportunity to give you a really detailed example of a buy to let property that a landlord of mine recently purchased, including all the costs as far as possible, the actual rent achieved and the net yield after all costs were factored in. Obviously I have my landlords permission to do this and I hope it’s useful to you.
The article will be in two parts. The first of which will cover the purchase, estimated costs of doing any works and what rent/yield we think it will achieve.
Then some time later a follow up article when the works are complete, any unidentified issues have crawled out of the woodwork and the property has actually been rented, so the figures at the end will be complete and accurate.
The story begins in October 2015 year when an existing landlord of mine asked me to help chose a new buy to let, they had a range of requirements and a broad idea of what they were looking to achieve.
Once they started looking at properties, they emailed me the details and I gave them my assessment. In the end they chose a one bedroom flat on Clepington Road not a million miles from the junction with Strathmartine Road.
The property was being advertised at an asking price of £65,000 and had been on the market for just over six months.
Based on that information and the estate agents photographs/description I estimated that it should rent (with some work done) at around £360 – £400 which at the bottom end (and I would always be conservative in my estimates) is a yield of 6.1%.
One of the key things was that whilst the property had a gas fire in the lounge it didn’t have GCH and that some of the décor and the kitchen was looking a little tired so that would have to be factored in.
As a result of a viewing my landlord put in and offer of £60,000, which was accepted, and keys are due to be handed over in mid December.
The viewing confirmed that the block was in very good condition and that the flat itself whilst fine but would definitely benefit from some minor updating to maximise the rent and it would of course would need the usual works done to bring it up to current safety standards.
We decided that the property would benefit from a redecorate (walls & woodwork) throughout, the carpets in the lounge/bedroom would need replacing, that the kitchen was elderly but that by replacing the doors, worktop and sink it would have a major impact without a major expense.
The biggest issue we thought was that we needed to put some proper heating in, partly because it would rent more easily and for a better rent but also because it would improve the poor EPC rating which under future legislation may become an issue. We considered GCH but then an electrician we use recommended the new Gel filled electric radiators that are apparently quite efficient and look good, of course they also don’t require to have the floors lifted to lay pipes.
At this point we are waiting for the property purchase to complete and our estimate of the costs for all the safety work, renovation, insurance etc should be around £5,000. However, as we all know from watching Homes Under the Hammer once you start digging into things you just don’t know what you might find.
At this point all I can promise is that I will keep you informed. We hope to have the work completed by Christmas and the property advertised. Once we have a tenant I will publish an update to this article with a full breakdown of the costs etc.
