Kirkland Drive - is 1 bed a better investment than 2?

One of my Landlord’s is considering whether to buy a one bedroom or two bedroom flat in Kirkland Drive (near Gordon Hill), a development where he already has a two bedroom flat which has performed very well.

In the past year two bedroom flats on this development have cost an average £220,000 to buy and around £1,100pcm to rent. One bedrooms have cost on average £168,000 and rent for around £850pcm. These figures give gross yields of 6% for 2 bedrooms and 6.1% for one bedrooms. Not bad, however I’d expect to see a slightly greater difference in yield as 1 beds tend to achieve around .4% more than two beds.

The difference in capital growth is also smaller than expected with the 2 bedroom flats achieving on average 34.5% growth since 2001/2 and the one bedrooms slightly less at 32%.

One bedroom flats can be harder to sell as they tend to appeal to a smaller market of buy-to-let investors and first time buyers, however my Landlord is looking at a long-term investment and so ‘Let-ability’ is his main interest. In that respect the one bedroom again has the edge, although both are very popular.

The closeness of these results show how important it is to wait for the right opportunity. For example: in August a 1 bedroom flat on this estate sold for £162,500 and would achieve 6.3% yield, something similar might just be worth waiting for.