Is Buy to Let in Daventry the best place for my inheritance?
£160,000 inheritance – Is buying Daventry Property still the best place for my windfall?
I had an interesting call from someone a few weeks ago that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in Woodford Halse, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £160,000. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £3,040 in interest a year. One of his other options was to buy a property in Daventry to rent out and he wanted to know my thoughts on what he should buy.
Notwithstanding the war on Daventry landlords being waged by George Osborne, the attraction of bricks and mortar endures for many.
As our man is a cash buyer, he would not have to deal with the cut to mortgage interest tax relief that will diminish or even eradicate, the profits of many Daventry landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.
I told him that buying a Daventry buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £3,040 a year or he could invest in property in Daventry and earn a lot more! The average yield (yield being the equivalent of the interest rate on the property) at the moment in Daventry is 4.08% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £6,528 a year. (I did mention there are plenty of landlords in Daventry earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).
The bottom line is that the success of investing in Daventry buy to let property versus a savings account will depend on the performance of those assets. Unlike with a savings account, with property the
capital you invested can also go up (and yes, it can go down as well).
Property values in Daventry have risen in the last twelve months by 5.7% meaning, that if our chap had bought a year ago, not only would he have received the £6,528 in rent, but also seen an uplift of £9,120 …meaning his overall return for the year would have been £15,648 (not bad when compared to the Post Office!).
.. but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. According to the Land Registry, average property values in
Northamptonshire currently stand 1.04% below the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Daventry, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.
…. So what would that £160,000 get you in Daventry? A decent 4 bed terrace in Long Buckby, a lovely 2 bed semi in Lang Farm or a really nice 2 bed house on the popular Timken Estate.
