Monday, 28 September 2015

House in Burley with potential 10% return

This 5 bed house on Village Street in Burley is in a great spot, especially for professional renters. It’s not far from Burley Park train station and close to plenty of bus routes making commuting into town or nearby areas easy and quick.

The lure of the possibility of having a property that would bring in the rent of 5 tenants is understandably appealing but looking at the ad closer it says to me that you’re unlikely to get that. Not only is this property one of many where too many rooms have been squeezed in to the space, it also only has one bathroom. Obviously you could then use the space better to create another one but this suggests to me that in its current state it wouldn't meet the requirements in order to be granted a HMO licence. If that was the case you wouldn't be able to convert in to a licensable HMO property as the council have put a stop to that.

In any case, this property has only been let to 3 tenants which should probably tell you all you need to know. The floor plan of its current lay out shows how the space isn't being used to its full potential.  I would suggest converting it into a 3 bed en-suite property, fitting a new kitchen and re-carpeting & decorating. This way you would be able to achieve a far better rent and if done to a high standard it should bring in around £1,235pcm or £14,820pcm.

The work involved should probably cost around £30k so if you managed to get the property for around £125,000 it should give you a return of nearly 10%, plus with such a high quality property you’d be safe in the knowledge that it would easily let out all year round. 

Tuesday, 22 September 2015

Headingley and Burley Buy To Let Yields at 7.63% - but should you look further afield?

I was at a recent business networking event in Headingley and Burley, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Headingley and Burley when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Headingley and Burley Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as St. Matthias Estate on the edge of Burley or the Granby estate off St. Michaels Road in Headingley, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as Canterbury Drive area, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Headingley and Burley today is 7.63%, which when you compare with say Hartlepool, the North East’s buy to let hotspot  at 7.73% pa, is very good. However, when you compare it with the 9.43% in the Anfield area of Liverpool, doesn’t look as good. But Liverpool property,  have dropped in value by 2.2% in the last 12 months and the Hartlepool property market has gone down by 1.4%.

When you compare the long term house price growth, it gets even worse.  Looking at the graph, since 1995 property values in Headingley and Burley have risen by 125.84%,compared with Hartlepool at 21.02% and Liverpool  at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords , a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

At the end of the day, as a Headingley and Burley landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment.

Tuesday, 15 September 2015

Is the Burley Property Market in crisis?

Since the 1960’s more people have owned their own home than rented but, for many young Burley people, the dream of buying their own home is dying...or is it?

Since the turn of the Millennium, in Burley (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home. In 2001, 42.47% of homes in Burley were owner occupied, today the figure is 29.1%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the Bank of Mum and Dad.

In Burley, only 39.5% of 25 to 34 year olds have a mortgage. When you compare Burley against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this - roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After the second World War the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters. 

However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. 

Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.  95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 125.84% since the early Spring of 1995 in Burley, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Burley are renting instead of buying. 

The issue quite simply comes back down to a lack of new homes being built. In Burley, only 16 properties a year are being built. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism.  With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’s have the backbone to realise the country needs a lot more decent homes built, the problem will just get worse. 

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day - and that can only be good news for us landlords!!

Tuesday, 8 September 2015

Why are less Burley people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved four times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Burley over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Burley, there are 3,419 properties. However, after we remove the 820 council houses, 1,556 privately rented houses and 47 houses where the occupants live rent free, that leaves us with 996 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 29.1% of the properties in Burley are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Burley, over the last 12 months, has only been 118. This means on these figures, the homeowners of Burley are only moving on average every 8.44 years.

There are a couple of reasons for this. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners. 

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels. 

This change to a relatively low inflation Burley property market (i.e. Burley property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Burley homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Burley buy to let landlords? Well for the same reasons existing Burley homeowners aren’t moving and less ‘twenty something’s’ are buying their first home as well. Burley youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting.  

I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 45.5% of Burley properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?

Tuesday, 1 September 2015

Great 2 bed house ideally located in Burley with a 9% return

This two bed house located on Argie Road is located between Kirkstall Road and Burley Road so ideally situated for professional renters. It's close to main transport links with buses going by every 5 mins or so taking you straight into Leeds city centre and Burley Park train station. It takes less than 10 minutes to get into town and is just a walk away from Cardigan Fields which is home to a cinema complex, gym, shops, restaurants and bars.

This great size two bed house offers plenty of space and from looking at the photos, you wouldn't have to spend much on it as it's pretty much ready to move in to as it is. It's got two great sized bedrooms and plenty of communal space so should rent easily.  The price of this house is probably what stands out the most, priced at offers over £100,000 it's a great deal. Other two bed properties in this area go for around £750pcm so when you do the sums you'd be looking at a 9% return which is pretty good!