Property vs Annuities

With the changes to the pension regulations that came into effect in April of this year, we at Martin and Co are seeing an increasing number of enquiries coming from people approaching pensionable age, who are considering property investment as an alternative to traditional pension annuities.

For many “soon to be” pensioners, the reform to the pension regulations, will bring the opportunity for many to invest in property, who have previously had little or no experience in this area.

Naturally, people of the age and experience who have saved throughout their lives to provide for their retirement are naturally cautious, and it’s great to see these people already researching their options in advance, and seeking advice from experts in the lettings market, such as the team at Martin and Co in Newcastle under Lyme and Stoke on Trent.

In order to give the best advice possible to these would be property investors, it is important for us to understand what the individual or couple is looking for from their investment.  In general terms people are usually looking to achieve one or more of the following results from their investment.

1. Generation of a regular monthly income to supplement savings and other pensions
2. A better return on their savings to the current low market interest rates
3. Investment to achieve a capital return on their investment, which can be sold at some point in the future should circumstances change and the money released.
4. Investment in an asset which should achieve capital growth over a period of time, or an income for their children or grandchildren.

It is only when we understand the reasons behind someone looking at a property investment that we can give them suitable advice.

Perhaps the best way to explain this is to use a recent example of a couple who were looking to invest in either the Penkhull Area, or around Werrington, as they had good local knowledge of both areas, and believed they were the right areas in which to invest.

Looking at the example of a 3 bedroomed semi-detached house in these areas, both make good sense from a rental perspective.  Three bedroomed houses are in relatively short supply, and will always rent faster than the more plentiful 2 bedroomed terraced properties, and as they generally attract people with families, the average tenancy length on a three bedroomed property is usually longer.

From a financial yield point of view, the Penkhull property would attract an average rent of £536 per calendar month.  This compares to £600 for a similar property in Werrington, and both of these achieve the same rental yield of 5%.

 

However, when we look at the investment needed to buy these properties, and the capital growth, one can see a real difference.   An average property in Penkhull would cost around £118, 828 in the current market, whilst a similar property in Werrington would cost £168, 058, so straight away we can see that the entry level to a Penkhull investment is significantly less than Werrington.

 

The comparison becomes even more interesting when we look at the capital growth of the respective areas.

 

In the last 5 years the average property value in Penkhull has increased by £8562.  Although this is less than the £9636 that the average Werrington property has increased in value by, the return has been far greater, due to the lower purchase cost in Penkhull.  Therefore a Penkhull property has generated a 7.8% return over this period, compared to £6.1% in Werrington.

 

So, in this particular case, using our experience of the local property market, we were able to give evidence backed advice to our new investors.  It was clear to them, that they could stretch their savings further by investing in Penkhull, and with the popularity of this area due to the hospital there would always be a strong demand for rental property.   When combined with the couples desire to invest in property not only to generate a monthly income for themselves, but also to assist their grandchildren in entering the property market in the future, Penkhull is the right location for them.

 

If you are looking to invest in property in the future, for whatever reason, and want advice based on our knowledge of the local sales and property market in Newcastle under Lyme and Stoke on trent, please give us a call now and ask to speak to Debbie.  We are also currently offering for sale a number of small property portfolios in the area, suitable for investment.

 

 

Birches Head vs Gloweth

Last week, one of our landlords who lives in Truro, came into our office to discuss his portfolio – as he owns properties in both his local area of Gloweth, and Stoke on Trent, he wanted advice on which of these areas would provide the best investment for him, as he works towards his retirement plan.

 

Whilst everyone talks about the significant growth of property values in Cornwall in recent years, a comparison of property prices from 1995 between Stoke on Trent and Cornwall is quite revealing.

 

Whilst in this period the average property in Gloweth has increased by £65,130 when compared to an increase in Birches Head, Stoke on Trent of £30,906 over the same period, this represents as massive 52% growth in Stoke on Trent compared with a 36% in Gloweth.

 

A similar picture is seen when comparing rental returns.   An average semi-detached property in Gloweth will rent for £767 per calendar month, compared to £462 per calendar month in Stoke on Trent.   Due to the higher selling price in Cornwall, the rental yield is 4%, compared to 5% in Stoke on Trent.  Furthermore a canny investor could buy nearly 2 properties for the same cost as one in Cornwall in Stoke on Trent, thus taking their monthly income from £767 to £924 for a similar level of investment.

 

With recent property market surveys quoting Stoke on Trent as one of the cheapest areas in the country to invest, along with the massive regeneration of the city which is currently underway, there has never been a better time to invest in the Stoke on Trent and Newcastle under Lyme area. 

 

If you are considering a property investment and want evidence backed property advice from our experienced team, please contact us at Martin and Co.  We are currently marketing a number of investment portfolios and individual rental properties which could be a great starting point for your property investment plans.

 

 

 

ST1 vs ST6 Apartments

With inflation recently falling to just 0.3%, and most experts and the bank of England not forecasting any change to the current 0.5% interest rate until spring of 2016, we at Martin and Co are seeing increasing enquiries from ordinary people considering property investment for the first time.

For many savers, the combination of an extended period of very low interest rates and therefore poor returns on their money, combined with an increasing confidence in the property market, relatively affordable property, and strong demand, it is easy to see why new investors are looking to the rental market in Stoke on Trent and Newcastle under Lyme.

For many new investors, the prospect of buying an old property which may need costly repairs and maintenance is not appealing.  Many with no previous experience in the property market are instead looking at new build houses and flats to provide them with a better return than their banks on their savings.

A couple looking for a buy to let investment recently came into our offices.  They were trying to decide between two new build properties which were up for sale, one in the ST1 area of Wilton Court, and the other at Sunnybank in Burslem.

Both of these areas are popular with renters as they have a large number of new build flats and houses, and are therefore sought after by couples looking to move in together, as well as people relocating to the area for work.

Martin and Co Stoke on Trent offer lettings services for the majority of owners at Sunnybank.  This came from our involvement with the builder when these properties were first constructed eight years ago, and whilst most have now been sold to new owners, many have retained Martin and Co as their agent.

There are two types of apartment at Sunnybank, with a few large two bedroomed flats, and a majority of two bedroomed flats with one small bedroom/study and one double bedroom.  With the smaller flats selling at around £70,000, and a rent of £400 per month, these will generate a 6% return.  Renting for £465 per month, but costing £80,000, the larger flats generate a 7% return.

The Wilton Court two bedroomed flats are more sizable, with two similarly sized rooms which makes these more appealing to sharers.  You would generally expect to pay around £80,000 for one of these flats which will rent at £495 per month, which again generates a 7% return.

Our prospective investors were looking at rental properties in order to generate a better interest rate than the bank on their savings, and with yields of 6 and 7%, these new build properties clearly make good rental sense, and both areas see strong tenant demand and good rental returns. 

Whilst you will still need to account for the costs of finding tenants, repairs, maintenance and ground rents, new build properties are appealing as they generally need less maintenance than an older property, and over the long term, we would also expect to see some capital growth in addition to the monthly yield.

We at Martin and Co are experts on the local property market in Stoke on Trent and Newcastle under Lyme, and manage a large number of properties on behalf of our landlords and investors.   We are able to advise prospective landlords on the rental performance of particular properties on areas, based on historical data, and our own experience.

Stoke-on-Trent Buy To Let – Demand and Supply

I have been discussing the Stoke-on-Trent rental market with some landlords recently and it seems that rents in Stoke-on-Trent are 5.65% higher than they were in 2008. Word has obviously got around as another Stoke-on-Trent landlord has since rung me, wanting to know more of the story of what was happening to current rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Stoke-on-Trent rental market is all about supply and demand (isn’t it so in all parts of the economy?). On the supply side, 506 rental properties have come up for let in the last 31 days in Stoke-on-Trent. It sounds a lot until you consider there are 16,020 rental properties in Stoke-on-Trent, that means only 3.15% of the rental stock of properties in Stoke-on-Trent are coming onto the market each month (it is normally around 5%).  One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. And this is the crux of the matter ...properties they want. Older properties in Stoke-on-Trent, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets have seen their rents drop. Tenants want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents for top quality properties in Stoke-on-Trent have risen by 1% in the last month. Any properties, old or modern, put on the market in good or excellent condition will rent in a matter of days.   

Interestingly, looking at Stoke-on-Trent property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015 (the latest set of data), property values remained static in Stoke-on-Trent, with 0% growth, meaning they are now 3.2% higher than they were a year ago.  When one looks at the regional picture, the West Midlands average property values rose by 0.2% in the last month. The difference doesn’t concern me, as the regional and local property values always even themselves out over the months. 

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Stoke-on-Trent to rise by 3% to 5% over the coming 12 months, following the Conservative victory.  In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the City. 

...And so back to our landlord. Each property is unique and so as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week. 

Maybank property...just what the rental market is short of

Good morning everyone, I was just looking at rigthmove for new to the market properties just to see if there was anything interesting by way of a buy to let opportunity.  I saw this one being marketed by Bob Gutteridge, it needs some work but is in the right area.  This would make a great rental property and anyone who called in for advice will know that I think 2 and 3 bed semis will give good long term returns as they are always popular and I can’t see that changing any time soon.  

 

http://www.rightmove.co.uk/property-for-sale/property-35093295.html

I haven’t seen inside and there are no photos but if bought for the right price there should be room for some capital growth after a decent refurb and you should get at least a 6% gross yield but perhaps more importantly properties like this will always let easily keeping the landlords enemy, Void Periods, to a minimum

Stoke-on-Trent Buy To let – Bedrooms?

Last week, a landlord from Stoke-on-Trent emailed me to ask, after reading the Stoke-on-Trent Property Blog, if he should extend his terraced house making an extra bedroom in the loft. He had a builder friend who owed him a favour, and thought a good way would be get an ‘inexpensive’ extension.

Having more useable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property.  Turn a three bed terraced into a four bed terraced and 9% will be added to the value. Looking at semi detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value.

However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord.  What would be the cost of making that extra bedroom? The average value of a terraced house in Stoke-on-Trent is currently £81,200 whilst the average value of a semi detached house is £118,800, meaning to make money the cost of the extension would need to be less than £7,714 on the terraced property and £12,474 on the semi detached house. Talking to a number of trades people in the town, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit of pointing work on the chimney!

Well, that got me thinking about how bedrooms affected rental prices and rent-ability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rent-ability of the property – the difference does not warrant the expense, hassle and trouble of extending.

• 19.2% of the one bed properties on the market to rent in Stoke-on-Trent have a tenant with an average rent of £406 per month
• 22.7% of the two bed properties on the market to rent in Stoke-on-Trent have a tenant with an average rent of £453 per month
• 22% of the three bed properties on the market to rent in Stoke-on-Trent have a tenant with an average rent of £539 per month
• 37.1% of the four bed properties on the market to rent in Stoke-on-Trent have a tenant with an average rent of £883 per month

No, if you want to increase the value of your property, be you a Stoke-on-Trent landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve.