Friday, 27 February 2015

It Takes A Brave Investor

When you see a property being advertised at less than the market value it often makes investors sit up & take notice.  But then the doubts creep in and thoughts turn to whether it is worth the time, money and aggravation to turn it into a successful and profitable rental property.

Take for instance the House that local agent, Astons, is marketing in Gossops Green, Crawley.

The photos on the website give a clear indication of the scope of the works needed to attract the best rent.  Many investors are looking for an easy purchase that a tenant can move straight into and minimise the void period.  To achieve the current ceiling rent of £1150 in that area this house will need a brand new kitchen, new bathroom, redecoration and carpets throughout.  I doubt there will be little change from £20,000 and at least 2 months without rental income coming in.  

But when you see similar houses being advertised at £270,000 it begins to look a more attractive prospect.  If no refurbishment were carried out the property would most likely rent at the lower end of the price spectrum, £950pcm.  The yield calculated at this rent and on the asking price would be 4.75%, just lower than the minimum 5% we all strive for.

Interestingly the yield increases if the refurbishment is carried out.  The brave investor would spend the £20,000 & rent the property at the top end of the rent spectrum of £1150.  Even when adding in the two months lost rent income the yield increases to 5.2%.  In addition to the increased yield the works may have pushed the value up to that of the similar properties nearby, £10,000 more than was spent.
It could have potential

If you have spotted any investments but unsure of their potential you are welcome to contact me for advice, my office number is 01293 735000

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