Should I invest in a new 2 bed Buy-to-let property or opt for an older one ?

Recently we have had potential buy-to-let investors visit our shop to ask for advice on whether to purchase a new property in one of the local developments or to invest in an older property. The soon to be opened Luton to Dunstable Busway would seem to be attracting BTL investors who see the potential of the improved connections between the 2 towns as more tenants are attracted to Dunstable with its Market Town attractions and the accessibility to Dunstable Downs.

Local to us on Church St is the Station Court development by Bellway Homes and the last 2 bedroom apartment was available for £138,995.

On the A5 to the North of Dunstable is a development by Bloor Homes called ‘Living @ the edge’ Here they have recently started work on the next phase of the development and prices for a 2 bedroom house start at £172,000 and 2 bedroom apartments from £162,000

Having viewed the show houses at these developments, many investors fall for the contemporary modern decor and modern fittings. Although this will come with a higher purchase price, they hope this will also equate to a higher rental value.

As an investor, you have to view a potential buy-to-let property as ‘a grey box’ and look beyond its appearance to assess the financial return.

Take the 2 bedroom apartment by Bloor Homes for sale at £162,000. The potential rental value on the property would be £700 pcm, producing a yield of 5.19%. Better than putting your money in the bank perhaps, but there are better deals to be had. In the developments of Kiln Way and Peppercorn Way which I mentioned in a previous article (click her for details) there are 2 bedroom apartments to be found for £120,000 and in each of these developments you will achieve £650pcm and therefore a yield of 6.5%. A more affordable property with a better yield in an established development.

The lesson here is that a new build does not automatically guarantee a premium rental, even though it will cost you a premium price! You still need to get the location right too. In this example, the older property has a lower asking price, yet commands a higher rent making it a much better investment overall