Why should you consider Buying to Let in Chelmsford?

 

In last weeks’ article, we spoke about the difference between Chelmsford and Braintree property markets. Now this resulted in a number emails arriving into my inbox as well as a few people popping into my offices for a chat about investing in buy to let.
Many people in our part of Essex, over the last few years, have seen the buy to let market become all about nest egg investment. It is fuelled by pitiful interest rates on building society savings and reflects the fact that building society savings accounts are paying half a per cent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future.
So what can you expect from your rental property investment? In the short term, rental yields are important, and in Chelmsford, the average annual yield is in the order of 4.5% per year. However, that is based on averages, and as most landlords in Chelmsford tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 5% to 6.4% per year depending on location and price in the City.

In the long term though, the question of capital growth is as important, if not more important (because if you have great short term yields, but the value of the property doesn't keep up with the rest of the market, you will have an asset that in real terms is dropping). As we mentioned in a previous article, average property values in Chelmsford currently stand at £314,212. Property values in Chelmsford have risen by 22.4% in the last 5 years. On the other hand, property investment is a long term game, so I wanted to share with you the research I did for a couple of Chelmsford landlords.
Roll the clock back 10 years to 2004 when the average value of a property in Chelmsford was £177,700. 15 years back to 1999 makes really interesting reading, as the average Chelmsford property value was only £107,800.  30 years ago was around £50,000 and just for a bit of fun, we looked at 1974 at it was around £14,800!
However, if one looks at say a 30 year investment period, if you had put your £50,000 into the stock market in 1984 instead of buying a house in Chelmsford, your shares today would be worth £238,800. Put the same £50k money in a Building Society account and you reinvested the interest back into the account, and your Building Society passbook would have around £280,250. Compare that with the property market in Chelmsford and the property would be worth £314,212 today.
Not much difference to the building society until you realise that with the rental property, as well as the capital growth in the building you would also have received rent over those 30 years, which you wouldn’t have received with the Building Society account!

A little gem in Springfield

http://www.rightmove.co.uk/property-for-sale/property-49137653.html

When I saw this property this morning on Rightmove, I just had to put it out there for you all to see as the yield potential is great at 5.8%!!

Inside, it looks to have had some modernisation done over the last few years, there's a nice modern kitchen & shower room, the carpet may need replacing for something a bit more neutral, but that's not going to break the bank.  

The area again is great for rentals, we have had quite a few of these little properties come to the market for rent and they have always gone withing the first week. In recent months if any property comes to the market for rent, as long as it's well presented, clean and the rent is right it will let almost immediately, that's just how it is at the moment.

It has just come on to the market for £155,000, which is not a bad price, it seems to me that the vendors are being realistic. When you compare this to an achievable rent of £750 pcm, up pops your 5.8% return. Not too bad is it?

A 3 Bed House in Chelmsford, ripe for the plucking

This house has the potential to be a really good investment property. It may need a little bit of TLC at the moment, but it appears to be only cosmetic, not much that a paint brush and some new carpets can't sort out! The only thing I can't see, is how modern the bathroom is as there is no picture. If it does need updating though, you can get a plain white suite quite cheap nowadays.
http://www.rightmove.co.uk/property-for-sale/property-29910996.html

This area is popular for many reasons, the main one being the local schooling and being a 3 bed house, means that you should attract a family and generally speaking, families are more likely to be a long term tenant, meaning less void periods for you as a potential landlord. 

The potential annual yield on this particular property, is also pretty good at 5.3%. Being on the market for £225,000 and would rent in the region of £995 - £1050. The chances are at the moment it would be at the higher end of the price guide for rent, due to lack of supply and extremely high demand!

If you have any questions about where to buy your next, or even your first property investment, drop me a line on stephen.frost@martinco.com

Potential good property in Chelmer Village

http://www.rightmove.co.uk/property-for-sale/property-32831469.html

Now, I've had a look at this property and although at the moment it isn't offering the best yield going, I think if you can get it at the right price, you could end up with a little corker.  It has been updated quite considerably, so is looking quite lovely, however the price is a bit top heavy compared to others that have been selling in the area. If you could get it slightly cheaper at £160k for arguments sake. When you are looking at a rental figure of £675 pcm, this should generate you an annual yield of 5%. It all boils down to weather you can get it for the right price.

If you would like to see any other 'deals of the day', follow this blog

Chemsford vs Braintree...

One topic that I am always asked about, both by existing landlords and new ones, is how one area’s property values have performed against another. When purchasing a buy to let property, there are two ways landlords make money through property letting; capital growth and rental income growth.
When a property increases in value over time, it is known as capital growth. Capital growth has been strong in recent times in both Chelmsford and Braintree, but the value of property does go up as well as down, and of course the local conditions surrounding your property have a big effect. Rental income is what the tenant pays you and hopefully, this will grow over time too. If you divide the annual rent into the value (or purchase price) of the property, this is your annual return.
One of our landlords from Great Baddow, who has a number of properties in both Chelmsford and Braintree, asked me about the difference between both these areas housing markets. I was quite surprised with my findings and wanted to share them with you.
The average property price in Chelmsford is currently £314,212. In the last 3 months property values in Chelmsford, according to my calculations, have risen by just over 2.4%. When this is compared back to the preceding months, it is showing that house prices have started to slow down in their increasing. In the previous 3 months, prices increased by 4.3% and 6 months prior to this increased by 4.6%. However, when we look at the bigger picture and look at how prices have performed in the last 5 years, prices are 22.4% higher than 2009.

Braintree has a slightly different story. Whilst property prices have increased by 16.2% in the last 5 years, it has been a bit more in fits and starts. To show you this in numbers, in the last 3 months, Braintree has only seen an increase in prices of 0.57%, the preceding 3 months, prices rose by 5.7%, 6 months before this, they only raised by 1.6% and the year leading up to this saw an increase of 3.24%. As you can see, there is not as much consistency in the price rises. Time will only tell if this will level out over the coming months.

So which is the better bet? Over the last 2 years, property values have increased at a 19% quicker rate in Chelmsford, compared to Braintree. If this trend carries on, Chelmsford would be the better area, in relation to long term house price growth. But then there is question of yield, as the average yield in Braintree is a healthy 5.3%, compared to Chelmsford at 4.5%.Although looking at the numbers is important when thinking about buying and investment property, you also need to look at the local market, what types of tenants are renting in the area you are interested in? Is there large council tenant demand, or mainly professionals?

Each Chelmsford (and Braintree) landlord will have different needs and requirements in his or her property investment. We are able to give an objective and unbiased opinion on what (and what doesn't) make a good property investment. Knowing what has happened to values in different towns, enables us to spot any trends or opportunities for buy to let landlords.
If you would like to discuss my thoughts on the property market, please feel free to pop into our offices on Duke Street.

Great Modern apartment in Chelmsford

http://www.rightmove.co.uk/property-for-sale/property-32924145.html?premiumA=true

Having a little browse earlier today and this apartment has come to the market. A great modern apartment and it has the potential to generate you a pretty good annual yield of 5.3%. 

It has just come on the market for £179,950, which for a nice 2 bed flat within easy reach of the City centre is not too bad at all. I don't think that you would have to do too much to it either, if the photos are anything to go by.

We have rented several apartments within this block and they achieve in the region of £795 pcm. 

If you would like any more information about buying a property to let, feel free to drop me a line on stephen.frost@martinco.com