Singing Pig

Dear All,

My estate agent is sending me details of an increased number of tenanted investment properties in Manchester, Accrington and Oswaldtwistle. Is the NW market awash with BTL properties? What's the game plan for the sellers?

A quick run through the figures and I can't even manage to get a measly 2% cash on cash return. E.g, 3-bed terrace in Moston:

Price	70000
Rent	240	pcm
Max. Mortgage  payments at 120%	200	pcm
Annual mortgage interest	2400
Mortgage rate	7,09%
Mortgage	33850
Deposit	36150
Cash / Cash Yield	1,3%

And this excuding voids, management fee, maintenance etc..

Is anyone managing to buy BTL in the North West for a decent return? How!?

Mr Sam,

We've been investing in the Manchester area for the past 15 years or so. I agree recently it's been pretty hard to make a measley 7%, The worst rental markets are trendy flats and run-down terraced houses for students - over satuated. Rentals are quite good for standard  2 bed terraced houses, young sharers or families, but house prices have gone up from reasonable £70ks to over £100k.

If it was rental income alone I wouldnt bother. But there are still some areas where regeneration is occuring (moston), new tram lines(Rochdale) etc and 7% is fairly likely to become 10+% in say 2 years and you stand a reasonable chance of capital growth too (even in todays market). Morecambe larger family properties are reasonably priced, but I havent looked at rentals yet.

Your example above, I'd say the house prices have risen recently, but rents havent yet (expect a 12 month delay). I'd either expect a grotty house for £50k/£240pcm rent or a (less) grotty house for £70k/£400pcm rent.

Have a look at Edward Mellar Auctions (and others), they sell a variety of terraces in different areas. I think last months auciton sold well, but the previous one didnt. Not sure what auction finance is available though.

In summary, I think my message is, there are still some good areas to invest in the NW, but you have to be very choosy, maybe even down to the exact street and you may have to take a loss for a year.

You may have to take a loss for a year???

OK, that was bad advice even in a rising market but in a declining one?!?!

Savings account = 6%+ and requires absolutely no effort. Why on earth waste time on an investment that is losing value and making a loss?

same wher i live, sellors asking 240k for 4 bed student houses, silly yields down around 4%, not mortgable.  Just sit on your hands for the next 12/24 months until capital values give you a reasonable yield .  depending on capital appreciation for profits is a mugs game in todays market. 

to answer your question, the game plan for sellers is to sell on quick to the next mug, so that they don't lose to much in the next couple of years.     If BTL investors have little equity in their properties then life might get very nasty unless they have enough income to pay for all the normal outgoings and heavly increased finance costs.

 

Chas

I've got some in Calderdale and these are sticking badly at the moment. Just seem very few good quality tenants around, although capital values are still tempting this is of little use with a satuated market.

 

Fellow SPs, thanks for your comments and debate.

 

Sounds like it’s a struggle to get a decent return on rental income in these areas at the moment. Looking at the options

 

• Buying for capital gain. SunnyS, good pointers on regeneration areas. I’d consider these if I was able to get a return above a savings account rate. I agree with Speedything and would not be prepared to take a loss.

 

• Sitting on hands: Chas, been doing that for too long L Got some capital to invest and if NW not currently viable then I need to find a market that is profitable

 

• Buy below market value – I’m sure that estate agent leads are not the best deals. Would anyone like to share details of a recent BMV deal in the NW with a decent yield? Inspirational stories welcome!

 

Chas, thanks for answering sellers game-plan question. I was wondering if I was missing out on something.

 

 

Hi Sam, there are deals to be had - just need to be choosy/conservative in the present climate. Completed recently on a 2 bed terrace, Valued at 70K purchased for 45K, rented back at £120 PCM positive cash flow. Seller was relieved to be shot of £800 PCM interest payments on credit card bills.

Property can drop at the rates forecasted by those prophets of doom  capital economics (they must get it right some day), and it will still make money on rental alone - even at SVR. Don't see where the negativity comes from, although some people are evenly balanced - a chip of either shoulder. Slowly slowly catchee monkey is the order of the day.

Bob