£255,000 inheritance - Is buying Crawley Property still the best place for my windfall?

I had an interesting email from someone in Crawley a few weeks ago that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in Copthorne, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £255,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £4,845 in interest a year. One of his other options was to buy a property in Crawley to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Crawley landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Crawley landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

 

New Builds in Popular Maidenbower

I told him that buying a Crawley buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £4,845 a year or, as he rightly suggested, invest in property in Crawley. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Crawley is 3.63% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £9,256 a year. (However, I told him there are plenty of landlords in Crawley earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).

The bottom line is that the success of investing in Crawley buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Crawley have risen in the last twelve months by 7.6% meaning, that if our chap had bought a year ago, not only would he have received the £9,256 in rent, but also seen an uplift of £19,380 …meaning his overall return for the year would have been £28,636 (not bad when compared to the Post Office!).

..  but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in West Sussex currently stand 12.2% above the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Crawley, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.

  

… and what would that £255,000 get you in Crawley? A decent 3 bed terrace in Gossops Green, a really nice 2 bed period terrace in Southgate or a lovely 3 bed terrace in Ifield West .. in fact, the world is your oyster. But which Oyster?  For any advice on buy to let investing in the Crawley area please feel free to contact me.

Sought After Northgate

2 Bed Flat For Sale

Now don’t let the photo’s put you off, this two bedroom property in Northgate is one of those that could be described as a buy to let banger.  With 2 double bedrooms and a separate kitchen they make ideal properties for a whole range of tenants, sharers, couples and young families.  This flat in Oak Way has been listed by the local King & Chasemore branch – you can view the listing by clicking the link below.

http://www.rightmove.co.uk/property-for-sale/property-40145625.html

We let one of these just before Christmas at £925.00 per calendar month, that’s a gross yield of 5.5%.  The Northgate area of Crawley is sandwiched between the Town Centre and Manor Royal making it ideal for anyone that commutes to London or works for the major employers such as Virgin or Thales on the industrial estate.  The no.10 Fastway bus, which runs 24 hours a day to Gatwick, stops just a few minutes from the flat.  Being leasehold there are service charges to take into account but the local authority is the freeholder meaning that you will only reimburse what is actually spent on maintaining the block.  For advice on the likely rental of any property in Crawley please feel free to contact me.

Langley Green Corker with 5.8% Gross Yield

With the rising prices throughout the town the pressure on yields has been steadily increasing leaving landlords with fewer opportunities.  I spotted that this two bedroom maisonette being marketed with local agent, Choices, has just been reduced in price.

http://www.rightmove.co.uk/property-for-sale/property-52959433.html

I let a similar property just before Christmas for £975pcm which would give a cracking 5.8% gross yield.  Langley Green is an established area that is handy for town, handy for Manor Royal industrial estate and handy for Gatwick.  With a private garden and two double bedrooms this would make a corker of an investment that has a wide appeal for singles, couples, young and old alike.

Reduced Maisonette in Langley Green

Crawley Housing Shortage

8.7% rise in Crawley Property Values adds weight to the town’s Housing Crisis

Crawley’s continuing housing shortage is putting the town’s (and the Country’s) repute as a nation of homeowners ‘under threat’, as the number of houses being built continues to be woefully inadequate in meeting the ever demanding needs of the growing population in the town.   My parents moved to Crawley in the 70’s and the other day at a family get together; the subject of the Crawley Property market came up in the conversation (as I am sure it does at many family parties in Crawley) after the weather and politics. My parents said It used to be that if you went out to work and did the right thing, you would expect that relatively quickly over the course of your career you would be buying a house, you would go on holiday every year, you would save for a pension.   But now things seem to have changed?

Back in the Autumn, George Osborne, used the Autumn Statement to double the housing budget to £2bn a year from April 2018 in an attempt to increase supply and deliver 100,000 new homes each year until 2020.  The Chancellor also introduced a series of initiatives to help get first time buyers on the housing ladder, including the contentious Help to Buy Scheme and extending Right to Buy from not just Council tenants, but to Housing Association tenants as well.

Now that does all sound rather good, but the Country is only building 137,490 properties a year (split down 114,250 built by private builders, 21,560 built by Housing Associations and and a paltry 1,680 council houses).    If you look at the graph (courtesy of ONS), you will see nationally, the last time the country was building 230,000 houses a year was in the 1960’s.

 

How George is going to almost double house building overnight, I don’t know, because using the analogy of a greengrocers; if people want to buy more apples (i.e. houses) in a greengrocers’ shop, giving them more money (i.e. with the Help to Buy scheme) when there's not enough apples in the first place doesn't really help.

Looking at the Crawley house building figures, in the local authority area as a whole, only 160 properties were built in the last 12 months, split down into 110 privately built properties and 50 housing association with not one council house being built.   This is simply not enough and the shortage of supply has meant Crawley property values have continued to rise, meaning they are 8.7% higher than 12 months ago, rising 1.0% in the last month alone.

I was taught at school (all those years ago!), that’s it’s all about supply and demand, this economics game.   The demand for Crawley property has been particularly strong for properties in the good areas of the town and it is my considered opinion that it is likely to continue this year, driven by growing demand among buyers (both Crawley homebuyers and Crawley landlords alike). You see Crawley’s economy is quite varied, meaning activity is expected to remain relatively strong into the early Summer of 2016, especially as some Crawley buy to let landlords try to complete purchases ahead of the introduction of new stamp duty rules in April.

.. and of supply, well we have spoken about the lack of new building in the town holding things back, but there is another issue relating to supply.   Of the existing properties already built, the concern is the number of properties on the market and for sale.   The number of properties for sale last month in Crawley was 337, whilst three years ago, that figure was 458 whilst five years ago it stood at 946… a massive drop!

With demand for Crawley property rising, minimal new homes being built and less properties coming onto the market, that can only mean one thing ... now is a good time to be a homeowner or landlord in Crawley.  

A Commuters Dream

To be "Close to Three Bridges Station" is top of many prospective tenants requirements and you can't get much closer than this 1 bedroom ground floor flat located in the ever popular Maunsell Park development that Martin & Co Crawley have been lucky to list for sale.   

Maunsell Park Development

The spacious flat benefits from direct access to the communal gardens from the kitchen, the lounge and bedroom offer a good sized space and the bathroom has been refitted.   You can view further details by clicking the link below.

http://www.martinco.com/property/for-sale/233640

The property is ideally situated with Three Bridges station just a stones throw away offering a direct service to London Victoria and London Bridge.  In the other direction there is a direct service to Brighton, Chichester and Southampton.  For a more local service the No.20 Fastway bus service to Gatwick Airport can be accessed at the station and there are a number of local shops and amenities only a few minutes walk from the front door.

Achieving a gross yield of 5% the property would make an excellent BTL investment, the property has been rented for the past few years and a rental income in the region of £825 per calendar month is expected.  I know from experience that property in this development is always highly sought after & the lucky landlord that buys this property can expect minimal void periods over the lifetime of the investment.  

If you have any questions on this or any other rental property investment don’t hesitate to get in touch.