574% Return for Cheltenham Buy To Let

      574% Return for Cheltenham Buy To Let landlords since 2000

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society , Stocks and Shares etc) are passive i.e. once the money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say is the fact that they like buy to let because it is both an investment as well as a business. It is this factor that attracts many of my landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kids in London playing roulette with their Pension Pot).

So if you are investing in the Cheltenham property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, this has been strong in recent times in Cheltenham, but the value of property can go down as well as up just like shares. Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

I was talking to a landlord who bought a flat in the Tewkesbury Road area of Cheltenham. He bought a very pleasant studio flat in 2000 for £27,500. It sold again in February just gone for £67,000, a rise of 143.63% in just over 14 years – a compound annual return of 6.57%.

However, the real returns are for those Cheltenham landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £27,500 purchase price of the Tewkesbury Road studio flat on an interest only 75% mortgage, he would have only needed to invest £6,875 (as his 25% deposit... borrowing the remaining £20,625), but his £6,875 would be worth today, £46,375 (£67,000 less £20,625 interest only mortgage)... a rise of 574.54% - a compound annual return of 14.61%... and I haven’t even mentioned the rent he would have received in those 14 years!

This demonstrates how the Cheltenham buy to let market has not only provided very strong returns for average investors since 2000 but how it has permitted a group of motivated buy to let Cheltenham landlords to become particularly wealthy. In fact, if this landlord had continued to re-mortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties (albeit with larger mortgages but greater future potential).

As my article mentioned a few weeks ago, more and more Cheltenham people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Cheltenham for buy to let, then please contact me on neil.west@belvoir.co.uk.

2 Bed Gloucester 6.0% Yield

We are marketing this recently redecorated 2 bed flat for sale. It is currently tenanted and managed by us. Its on the market for £105,000 and lets for £525.00 PCM . Thats a yield of 6% ( exl. service charges) . 

                              http://www.zoopla.co.uk/for-sale/details/36969788

The property is in  great location with easy access to the rail station, hospital and city centre.
If you are interested in discussing this or any other propeties you may have seen, please do contact me on neil.west@belvoir.co.uk

General Election - Shock Majority!

What will General Election result do to the Cheltenham and Gloucester Property Market’s?

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Cheltenham and Gloucester property market. Talking to other agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus in the Cheltenham and Gloucester property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in property prices in 2014, and political uncertainty ahead of the General Election, slowed demand.

Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Cheltenham and Gloucester buy to let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their buy to let portfolio. Now that uncertainty has been removed, the long term picture is very positive.

So, with all that uncertainty now removed, where next for the Cheltenham and Gloucester property market? Well with inflation at zero and with the Money markets happy David Cameron is still at No.10, the Bank of England have no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.

You see over the past couple of years, Cheltenham and Gloucester landlords have benefited from a booming Cheltenham and Gloucester job market. Unemployment in Cheltenham has dropped to 3.15% and 2.7% in Gloucester, as a year ago,1,599 people in Cheltenham and 2,341 people in Gloucester were claiming unemployment benefit compared to today’s 891 in Cheltenham and 1638 in Gloucester . With more jobs and better pay, as the level of rents is directly linked to tenant’s wages, there has been an increase in the rental prices tenants are willing to pay for good quality Cheltenham and Gloucester properties.

Some landlords might be nervous about Tory plans for the housing market over the next five years in terms of tenant demand for their rental properties. One plan is for Housing Association tenants to have the right to buy their property. These tenants were never in the private rented sector and will actually increase the supply of properties in the housing stock in decades to come. The Government ‘Help to Buy Scheme’ has only helped to buy 50 Cheltenham properties and 318 Gloucester properties since April 2013. Considering 2,899 properties have changed hands in the last year alone in Cheltenham and 2,830 in Gloucester, I don’t think it has made a huge difference to our local property market.

The biggest matter, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago you were seen as a second class citizen if you rented a property. In Cheltenham and Gloucester, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants. If you are an existing landlord in Cheltenham and Gloucester or thinking of becoming one (or as we like to call you .. a FTL .. a ‘first time landlord’), then I suggest you seek out specialist advice and opinion. We will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Cheltenham and Gloucester property market if you pop into our offices. However, if time is at a premium, you can email me at neil.west@belvoir.co.uk

Are Attitudes to Home Ownership changing in Cheltenham?

Speaking to a Bank Manager the other day in Cheltenham, we got talking about the state of the Cheltenham property market and whether we, as a country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job.

Even though a recent report by the Halifax stated home ownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice. In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

The biggest barrier often mentioned to buying a house is the lack of sufficient wages and the high level of deposits. However in Cheltenham, if a couple, one on the average Cheltenham salary of £30,089 pa and the other on the minimum wage, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment wont mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £7,300 as a deposit to buy a top of the range one bed apartment in central Cheltenham or a good honest 3 bed ex local authority semi in Whaddon. ..it comes down to the perceived capability to buy nowadays.

Interestingly, when I looked at the Cheltenham figures, the average Cheltenham tenant has a younger profile (especially the sub 24 year olds) than the English and Welsh average, as can be seen from the graph below. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not! (And that is good news for landlords as they make excellent tenants)

So what does all this mean for Cheltenham landlords and future Cheltenham landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although home ownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Cheltenham, people still need a roof over the head, and that is why, as I mentioned a few weeks ago that the demand for rental properties will only continue to steadily rise in the coming decade. If you want to know where the Cheltenham Property market is heading and where you should (and shouldn’t) buy, please send me an email to neil.west@belvoirlettings.com

Two Speed Cheltenham Property Market

With the General Election upon us , property values in Cheltenham are still 0.6% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Cheltenham landlord’s point of view, the Cheltenham properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Cheltenham.  Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to home-owners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Cheltenham.

As I mentioned a few weeks back, the pension rules have changed  which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn't be forgotten there are tax implications taking more than a quarter of your pension pot out  , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn't be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Cheltenham people wanting to become landlords for the first time. In Cheltenham, the highest returns for the lowest investment are at the lower end of the market eg the classic apartment . Unfortunately apartments , with two bedrooms are coming to the market in smaller numbers than the larger four bed’s  in  top end sectors of the Cheltenham property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Cheltenham, in one month alone 338 two bed properties were on the market in Cheltenham. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 286 two bed properties on the market in Cheltenham to choose from. Today, that figure stands at only 282..whilst the number of four and five beds has increased significantly ...  interesting don’t you think?

At that lower end of the property market in Cheltenham, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months, we are beginning to see a polarised property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Cheltenham, thus narrowing the gap for people looking to move up market!