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One House or Two Flats - What should you buy?

I often see investors who want to buy the biggest house they can find with their available cash. ...

I often see investors who want to buy the biggest house they can find with their available cash.  But in the world of property investment we often find it is the investors who have divided their cash among as many properties as possible that benefit the most.  As an example I have seen that Ward and Partners are currently advertising a great family home in the Westcliff area of Ramsgate for £199,995.

It has all the hallmarks of being a great rental property, driveway, close to the train station and close to schools.  If I listed this house to rent the phone lines would go into meltdown with the amount of enquiries we would get.  Based on a buy to let mortgage of 75% the deposit would be around £50,000.  A conservative rental valuation would be £850 per month giving a yield of around 5.1%.

However if you had £50,000 cash I would be telling you to increase your yield, simply by buying two smaller properties.  I have seen a 2 bedroom maisonette on the other side of town being advertised at £99,995 and another 2 bedroom maisonette around the corner on Hardres Street for the same price.  Obviously not as attractive as the house, there are no driveways but the office phone would still ring and we would have tenants very quickly for both.  The £50,000 will buy both of these properties with a 25% deposit and I would give a conservative rental figure of £575 on each.  Combine both rents and that gives a rental yield of 6.9% - 27% higher than the yield for the house!

Here at Belvoir, we don’t sell properties so you can be 100% confident that our advice is impartial and will help ensure you won’t be pushed in to buying something that isn’t suitable when you visit estate agents. 

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