Why Terrace Houses Make Good Investments
So we are beginning to have a consistent period of positive messages coming out about UK property – with prices set to be higher at year end than at the start of the year!
So the market indicators are starting to look positive - but which properties should you be buying?
The type of property we have always been most keen on - and indeed what we have mainly bought ourselves have been terraced or semi detached properties.
What has attracted us to this type of property?
- Excellent Value for Money! - In many areas of the country we can get these for under £100,000 and the rental yields fit very well. Local affordability - so critical with any investment - is excellent here. As you know we have always recommended going for areas with properties where values are no more than 4 times the average salaries - so based on a salary of £20,000, looking at prices around £80,000.
- Strong rental demand and low voids - the key with these areas is many people live in these local areas all their life, and as long as the property is good value and in good condition they will stay for a long time - my average tenant stays for around 3 years!
- No furnishing costs so tenant treats as their own home - all my terraced houses I rent out unfurnished, including no white goods! This means low costs here, and most importantly it means when the tenant moves in they move all their own belongings in, so treat it very much as their own home! Many tenants will have no intention of moving out and will even spend their own money keeping the property maintained eg painting the children's bedroom, putting decking down in the garden or laminate flooring down in the living room - I have even had a tenant email me to say he saw there was a grant available for loft insulation, and he had organised and was popping the certificate in the post!
So going for sensibly priced properties that are attractive both in terms of value and rental to the local market is an excellent market to target!
Even when values have dipped over last 2 years, this has not affected the cashflow - in fact cashflow overall has improved strongly with interest rates dropping.
We have started to go for some apartments - simply because values have dropped by as much as 50-60% in some areas - to now be far better value and actually work on a buy to let basis! However we very much recommend having a good number of houses within your portfolio as well for the key reasons highlighted above! Good cashflow and low void periods combined with strong local affordability make terraced houses an excellent base to any property portfolio in the UK!
Article Courtesy of Alan Forsyth @ Property Investment Deals
