Thursday 11 June 2015

Do Apartments in North Springfield make good investments for Buy to Let?

I was talking to a potential landlord who lives in Chelmer Village the other day. She wants to purchase her first Buy to Let property and has noticed our rental index and previous articles, so was interested in getting to know the industry a little bit more. She had also noticed that quite a few apartments are coming up for sale in the North Springfield area at quite reasonable prices in comparison to some areas of Chelmsford.

She wants to try and get a property with quite a good return on her investment, as it’s not really doing anything in the bank. She had noticed on The Chelmsford Property Blog, that some of the apartments in the North Springfield area get quite a good yield, so I thought I would look into this in a bit more detail for her. This is what I found.

In the last year, 18 apartments have been sold in North Springfield, 13 of these were two bedroom apartments, selling for an average price of £122,076. Two bedroom apartments in this area rent on average for £696, which could produce a fantastic 6.8% annual yield. The remaining 6 sales were one bedroom apartments with an average selling price of £102,812. The one bedroom apartments in this area have an average rental price of £569, which can produce an almost equally good yield of 6.6%.

However, this isn’t the full story. The reason that the selling prices in North Springfield are quite reasonable, is due to the fact that many of the apartments have short leases, due to being built in the 1960’s/1970’s. This can restrict the way you purchase the property as some mortgage lenders won’t lend, or the interest rates will be quite high if the lease is less than 70 years.

Leases can be extended though and can cost around £12000 to do (depending on leasehold company). If you are buying the property to let though, you won’t necessarily have to worry about extending the lease straight away as the plan normally is to keep the property for a few years. Rent it out for 5-10 years, and then when you are looking to sell, renew the lease at that stage. This means you can ask for top money, as the property will have a brand new extended lease.

Property values for 2 bedroom apartments in North Springfield, Chelmsford have risen on average by around 10% in the last 5 years, which is below the Chelmsford average of 17%. But this is one of those classic examples of ‘What is more important, high yield or capital growth?’

With potential annual yields in the high 6.6% - 6.8% bracket, this area is great for the quick investor.

If you would like to talk to us about your potential investment criteria, please come into our office on Duke Street.

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