We have a number of new developments in Dunstable which attracts a number of enquiries from investors asking me about their suitability as a property investment.
There are a number of buyers who are usually new to property investment and are understandably attracted to a new property with its clean modern finishes and NHBC 10 year warranty, but there is usually a premium to be paid for this. Just as in purchasing a house in an area and having a budget for that type of property there will always be a ceiling price for a rental property and just because you have paid £30,000 more for that property this doesn’t mean you can command an extra £100 per month or more over a similar property that might be only 10 years old.
If for example one of our investors was looking at the new Linden Homes development in Dunstable they would be looking at paying £175,000 – £200,000 for a 2 bedroom apartment. Currently an equivalent 2 bedroom apartment in The Parklands in Dunstable, a sought after gated development in the Theatre District, would be available for a maximum of £160,000. To achieve the same return as can be achieved on The Parklands apartment when purchasing one of these new apartments by Linden Homes you would have to be asking £100-£200 per month more from your tenants. Not only are you unlikely to find tenants in the area searching for a 2 bedroom flat in that price range, but you have now stepped easily into the 2 bedroom house rental market and even the rental figure for a good 3 bedroom house if you are asking for the higher rental figure.
When we then look at houses we find that many period properties can offer features that are rarely found in new-builds and investing in them makes good business sense because they tend to outperform new homes in terms of rental levels and enjoy above average price rises.
Of course, contemporary properties have their own attractions, with many investors keen on the fact that such developments are literally ready to go. Not everyone has the funds available to refurbish an older house, or is able to wait several months before it is ready to let and start earning income.
However sometimes the easiest property to let is a well-maintained, well-equipped, older one that has been finished to a high specification.
Such homes are always in big demand and rarely stay on our books for long. If a landlord is looking to invest in a property that never sits empty, then the best bet is very often one with age and character.
When discussing the pros and cons of older properties with investors I will normally offer the following advice:
- Many tenants prefer properties that have a special charm and period features, such as original fireplaces, windows or doors. New-builds on modern developments tend to be identical but are attractive to the younger market- unlike period properties, each with their own unique selling points.
- Older properties may require a little more maintenance, but landlords can save – and also make – more revenue in the long term if they are able to handle minor DIY jobs themselves and also have a clear plan for on-going maintenance costs.
- Longer established homes can offer more space for the money and usually feature larger rooms and higher ceilings with greater flexibility to change and adapt the floor layout.
- Strong demand for quality period conversions means that such properties will command a higher rent.
- Well-maintained older buildings hold their value well and enjoy above average price increases.
- Landlords have greater scope with an older property allowing them to convert or refurbish it to meet local demand.
- Older homes tend to be found in the most desirable locations and are more likely to be in established communities with good schools and local amenities.
- Built-in storage facilities such as airing cupboards, wardrobes and pantries are popular features found in many older properties.
- Attics and cellars offer the investor considerable scope for conversion.
- Many older houses have larger gardens that are much sought after by families.
- Modern features can easily be installed in a period property. Marrying tradition with the latest technology will reap the biggest rewards for the buy to let investor.
Older properties may require more work upfront and will need a bigger on-going maintenance budget than a new build, but the rewards are worth it.
Get it right and you will find yourself with an investment that not only yields a secure, premium rental income but also goes up in price at a rate faster than that of the average new-build.
