Which would you pick - a 11% Return with a Falkirk Buy to Let Property or a 1.5% Return with The Post Office?

I had an interesting email from someone in Falkirk a couple of 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 Morningside, 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 £160,000 from an elderly aunt. 

One option he told me was put it into a savings account. The best he could get from a reputable lender was a 2 year bond with the Post Office, which paid 1.5%, meaning he would get £2,400 in interest a year.  One of his other options was to buy a property in Falkirk to rent out and 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 Falkirk landlords being waged by both the UK and Scottish Governments at the moment, 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 some Falkirk landlords. It’s true he would face the extra 4% in Land and Buildings Transactions Tax (the old ‘Stamp Duty’) to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Falkirk 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 £2,400 a year, or as he rightly suggested, invest in property in Falkirk. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Falkirk is 6% per annum, meaning our potential F.T.L (First Time Landlord), should be able to, depending on what he bought in the town, earn £9,600 a year before costs. (However, I told him there are plenty of landlords in Falkirk earning more than this, 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 this, the success of investing in Falkirk 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 a savings accounts, 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 Falkirk have risen by 4.87% per annum on average over the last five years, meaning that on top of your £9,600 per annum in rent, you would also seen an uplift of £7,792 per annum …meaning his overall return for the year would have been £17,392 or 10.87% (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 1979 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped 1988 and did take 13 years to reach back to those 1988 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Registers of Scotland, average property values in Falkirk currently stand 20.0% above the January 2008 (ie pre crash) level, and anicdotal evidence suggests that in the nicer parts of Falkirk, we are well above these sorts of levels. Therefore, all this talk of property crashes seems unfounded.

… and what would that £160,000 get you in Falkirk?  A fantastic flat as well as a nice house in many parts of Falkirk ... in fact, the world is your oyster. But which oyster?

If you would like a chat to find out more about investment property and property management in Falkirk please pick up the phone (01324 469840) or email (robert@thekeyplace.co.uk).

www.thekeyplace.co.uk

#Falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #privaterentedsector #prs #firsttimebuyers #lettingagents

Welcome to The Key Place’s blog - Confessions of a Letting Agent

Landlords often ask us what goes on behind the scenes at The Key Place and so we thought we would share our experiences, and what we have learned from those experiences, with you.

Property inspections – they are certainly not all dull, and this particular one did make me laugh!

One of The Key Place’s newer members of staff went to carry out an inspection at a property where we had long term tenants who had never given us previous cause for concern as a result of inspections. 

The staff member arrived back at the office looking somewhat stunned, to say that the tenants were growing cannabis plants in the bedroom – she saw a number of plants, underneath specialist lights. 

In recent times we have been made increasingly aware of the problems of cannabis farms in rented properties.  Staff have been briefed in being vigilant.

I decided to visit the tenants immediately to see if they could shed some light (no pun intended) on the situation, as this seemed very out of character.  I called and asked if I could pop by and took my office manager with me.  On answering the door, I asked the tenants outright if they were growing cannabis plants.  Amidst much laughter, they explained that it was not a cannabis farm but the tenant’s mother’s tomatoes, which they were looking after while the mother was on holiday.  They invited me in to have a look and sure enough I was able to confirm that those were indeed tomato plants!

This was a good learning curve for The Key Place staff member as we were able to educate her in how to tell a cannabis plant from a tomato plant in the real world!  And on the plus side, I was delighted with her vigilance. 

For information on all of The Key Place services, please visit our website, www.thekeyplace.co.uk.

Modern, Falkirk BTL property with a yield of 7.6%

Today’s buy to let opportunity from The Falkirk Property Blog is a modern flat in the New Carron development in Falkirk.

The property is a two bed flat, first floor flat in Dundee Court, New Carron, Falkirk.  It has a large lounge with feature bay window, a separate dining kitchen, two double bedrooms with built-in double wardrobes and a bathroom with a shower over the bath.  The flat looks like it has double glazing (but the sales chat doesn’t actually mention this so it would be worth checking) and it has electric heating (the sales chat should legally give the EPC rating but I can’t see it so it is worth checking this out to get an idea how economical the heating it).  Externally there is a resident’s parking space with the property as well as communal grounds.

Double click here to see more details of this property

Turning the all important financials.  The flat is on the market with Homes for You for offers over £69,995 so let’s say it goes for £75,000.  I would expect this property to achieve rent of £475 pcm so when we work out the annual gross yield you could be looking at a gross return of 7.6% which is a fairly good return in the current market.

I hope you find our posts useful.  If you would like some advice with your potential investment, please come and see me in our offices (6 Vicar Street, Falkirk), call me (01324 469840) or email me (robert@thekeyplace.co.uk).

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers