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.
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