Last week, a young couple called in for advice. They were planning to relocate to Japan with work, but wanted to purchase a buy-to-let in the UK. They had viewed a new-build house, and had fallen for its contemporary modern decor and modern fittings. Although this came with a higher purchase price, they hoped this would 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. The property was a brand new 2 bed end terrace, in a less popular area of Haywards Heath, for sale at £220,000. The potential rental value on the property would be £850 PCM, producing a yield of 4.63%. Better than putting your money in the bank perhaps, but there are better deals to be had.
I found a modern 2 bed semi house in Burgess Hill on the desirable West End Meadows Development, within easy walking distance of St Pauls secondary school and The Triangle Leisure Centre. Although more than 10 years old, the property has been well maintained with a new kitchen and bathroom. On the market for £210,000 it would achieve a monthly rent of £895 PCM, giving an annual yield of 5.14%.
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 due to its location – making it a much better investment overall
