I had an
interesting email from someone in Burgess Hill 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 Wivelsfield, 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 £260,000
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 £4,940 in interest a year. One of his other options was to buy a
property in Burgess Hill 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 Burgess Hill 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 Burgess Hill 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.
I told him
that buying a Burgess Hill 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 £4,940 a year or, as he rightly suggested, invest in property
in Burgess Hill. The average yield (yield
being the equivalent of the interest rate on the property) at the moment in
Burgess Hill 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 £9,438 a year. (However, I
told him there are plenty of landlords in Burgess Hill 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 Burgess Hill 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 Burgess Hill 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 £9,438 in rent, but also seen an uplift of £19,760 …meaning his overall
return for the year would have been £29,198 (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 Burgess Hill,
we are well above these sorts of levels. Therefore, all this talk of property
crashes is unfounded.
And what
would that £260,000 get you in and around Burgess Hill? A decent 3 bed terrace
on Acre Close, Haywards Heath, a delightful 2 bed end terrace on Fairfield Road
or a stunning 2 bed apartment in Bolnore Village, in fact, the world is your
oyster. But which Oyster? Well, my blog reading friends, if you want to read
similar articles like this and what I consider to be the very best of buy to
let deals in Burgess Hill, irrespective of which agent is selling it, then you
need to visit the Burgess Hill Property Blog http://midsussexproperty.blogspot.co.uk/
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