MoneyMagpie

Jun 01

The big buy-to-let hotspots in Britain

 

Manchester is the best place to buy in if you’re wanting to get a decent income on a buy-to-let property.

This is according to a new survey by HSBC which has graded towns in Britain to find the ones that have low prices but high rents.

Not surprisingly, London isn’t even in the top 50 although the borough of Newham is quite high up in the top 20.

In fact, on the whole it’s northern towns that offer the best value for landlords.

So should you rush into Blackpool or Hull, Southampton or Liverpool to get a nice regular income?

Well, maybe.

 

 

Is buy-to-let a good investment?

Make money investingYes it can be, but it’s certainly not for everyone.

Pro: The best part of a buy-to-let is the possibility that not only will your investment increase in price over time (generally house prices are set to rise in the long-term) but, if you have a large mortgage on it, someone else will be paying for it as the rent you get on the property should cover the mortgage and more. All you have to put in is the deposit and ongoing maintenance.

Con: Property is a risky business as you might not get tenants all the time and even if you do they might not pay or they might trash the place. Also, you need a good deal of money to put down as a deposit and it’s difficult to get that money out again – it can take months to sell a home. It’s also extra work, particularly if something goes wrong with the boiler, the roof or another part of the house.

 

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Is buy-to-let good for a regular income?

make-money-at-homeYes it can be, but it’s not a guaranteed one.

If you have a lump of cash that you want to get an income on – say you’re retired and want a regular return on your money – then buying one or more places in, say, Manchester or Blackpool could give you a much better return per year than you would get with a savings account, gilts or bonds…or even stocks and shares.

But there are problems:

  • You might not have tenants for enough months to give you that proper income
  • The tenants might be bad and cause expensive problems in the property
  • The property itself might develop expensive problems
  • You might not have the time or energy to maintain it properly
  • You might not sell it for the amount you want for it if you suddenly need some or all of the cash

So keep all of these in mind when thinking about it. It’s not something you should rush into.

 

 

What’s the best way to do a buy-to-let?

There are two reasons to do a buy-to-let:

  1. You want to grow your money – it’s a long-term investment
  2. You want a regular, good income on the cash you already have

property2If you want to grow your money – primarily you should be interested in how much the property you buy is likely to go up in the next 5, 10 or 15 years.

It’s people who are looking to invest for growth who tend to put money into London property (also they’re people with a lot of cash to spare!). They expect property to grow fast, as it has done in the recent past. However, there are no guarantees that it will continue to go up. We may be at the top of a bubble.

But, as you can see from the HSBC chart below, there’s good growth in other parts of the country too and you don’t need so much cash to put down there either.

Having said that, you can also look at property where the rent is very good compared to the price (again, see the list below) as that way you borrow money and your tenants pay off the mortgage quickly and easily for you. That’s another type of growth – you just put down a small amount for the deposit and others add in the extra money over the years.

forrentIf you’re looking for income from your property – you definitely need to go for places where the ‘yield’ (the amount you get in rent compared to the amount you paid for the place) is high.

So this is where the HSBC chart is very handy. You can see below which parts of the country give you a good yield, particularly if you don’t have the hundreds of thousands of pounds needed to invest in London (actually the yield in London generally is pretty rubbish anyway, so that’s alright).

Go for properties that are low-maintenance, are recommended by local lettings agents as popular with renters and are in a city where the yields are generally pretty good.

 

 

Where should I get a buy-to-let

According to the latest stats from HSBC, Manchester is the best place to invest for a good yield, followed by Kingston upon Hull, Blackpool and Forest Heath (Surrey).

One thing to consider, apart from the yield you get (in other words, how much rent you get compared to how much you spent on the property) is how close the property is to where you live. If you’re needing to manage the property yourself then it’s best to choose something that’s easy for you to get to. If you live in St Ives in Cornwall, for example, buying in Manchester may not make much sense.

 

Location % of housing stock privately rented Average house price Average annual rent Rental yield
Manchester 26.85% £108,870 £8,628 7.98%
Kingston upon Hull 19.02% £69,135 £5,400 7.81%
Blackpool 24.16% £79,654 £5,856 7.35%
Forest Heath 21.80% £171,322 £12,432 7.26%
Coventry 19.02% £116,946 £8,424 7.20%
Southampton 23.42% £151,415 £10,800 7.13%
Nottingham 21.64% £89,312 £6,288 7.04%
Liverpool 21.75% £90,426 £5,928 6.56%
Cardiff 20.32% £150,892 £9,624 6.38%
Portsmouth 22.28% £155,696 £9,900 6.36%

 

 

Can you afford to do a buy-to-let?

switchGenerally speaking mortgage companies want you to put down at least 40% of the value of a buy-to-let property in order to get a buy-to-let mortgage. So if you buy an average property in Manchester, for example, you should have about £44,000 of your own to put towards it.

After that, though, there are some really good mortgage rates around, as you can find through our award-winning brokers, London & Country.

If you’re sold on the idea of a buy-to-let (or a few of them) then now is definitely a good time to get a mortgage.

 

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What are the downsides to buy-to-let

To me there are two main downsides:

  • The general NUISANCE of looking after a property
  • The moral issue – the more people invest in buy-to-lets the harder it is for young people to get on the housing ladder

Looking after your property

sell propertyI had a buy-to-let property for a couple of years and it annoyed the pants off me!

It was a nice flat, in the same building where I live and easy to rent out.

You would think it would be perfect.

But I’m the sort of person who can’t be bothered sorting out my own washing machine, let alone someone else’s!

To me it was a load of hassle that I could be bothered with. I sold the flat, paid off my own mortgage and invested the money in shares, pension and….well, Moneymagpie actually.

The property’s value has shot up (grrr) since, but I’m still quietly glad not to have it hanging round my neck.

I’m also secretly smug that…

 

…I’m not stopping other people afford their own place

sadBecause, honestly, that is much of the problem with the UK housing crisis.

Yes we should be building more, but look at the situation in London and other big cities: residential properties are being built and are instantly sold to foreign buyers, many of whom never live in the properties.

The buy-to-let craze is definitely putting up prices and making it near impossible for young people or people in lower incomes to afford their own homes.

I REALLY don’t like this so although I often suggest buy-to-let as a way for people (particularly retirees) to make a regular income on their investment, it’s not one that I am generally happy about.

Really think about that when you consider a buy-to-let.

 

What do you think? Have you got a buy-to-let property? Do you think people should be stopped from investing in buy-to-lets?

 

 

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