Do I buy a freehold house or a leasehold flat in Cheltenham?
Most people will say freehold every time, because you own
the land. However, it’s not as simple as that (it never would be would it!). The
definitive answer though is to research what Cheltenham tenants want in the
area of Cheltenham they want! The tenant is ultimately your customer, and, if
they don't want to rent what you decide is best to buy, then you are not going
to have a successful BTL investment.
So starting with the tenant in mind and
working backwards from there, you won’t go far wrong. In a nutshell, find the
demand before you think about creating the supply Leasehold flats and apartments in Cheltenham are excellent
in some respects as they offer the landlord certain advantages, including the
fact a flat can be initially cheaper to buy. Yields can be quite good, offering
better cash flow. The building will already be insured and yes there is a
service charge, but it’s still for a service at the end of the day and that
cost is spread between many others (i.e. when your freehold house roof goes,
its falls 100% on your shoulders) and one of my favourites there is often
no garden to maintain or blown down fences to replace!
However, some Cheltenham leasehold flats can suffer from poor capital growth.
Some leasehold properties have no cap on the level of the service charge and it
may get out of control. The length of the lease will significantly affect value
if not renewed before it gets too short. Thankfully there’s not many, but some Cheltenham
apartments/flats have burdensome clauses. Finally, with leases, there can be
sub-letting issues – which means you can’t let them out.
So what do the numbers look like? Well since 2003, the
average freehold property in Cheltenham (detached, semis and terraced) has
risen from £190,299 to £334,564, a rise of 76% whilst the average Cheltenham
leasehold property (flats and apartments) has gone up in value from £121,795 to
£183,610, a more mediocre rise of 51%.
I was really interested to note that of the 10,260 rental
properties in the Cheltenham Borough Council area that the Office of National
Statistics believe are either let privately or through a letting agency, 5,790
of them (or 56.4%) are apartments. However, there are only 13,832 apartments in
the whole council area (be they owned, council rented or privately rented), which
represents 27.2% of the whole housing stock in the area. This really intrigued
me that, quite obviously, there is a high proportion of Cheltenham’s leasehold
apartments/flats rented to tenants compared to detached, semi’s or terraced.
Fascinating don’t you think?
Every Cheltenham apartment block, every terraced house or
semi is different. Like I said at the start, the definitive answer though is to
research what Cheltenham tenants want in the area of Cheltenham they want.
Demand for town centre apartments, near the nightlife and transport links can
be popular and can offer the Cheltenham landlord very good yields with minimal
voids. However, Cheltenham terraced houses and semis, whilst not always
offering the best yields (although sometimes they can), they do offer the Cheltenham
landlord decent capital growth.
My advice to the prospective landlord as it is to you is do
your homework. A great source of info many Cheltenham landlords use is me! What
many Cheltenham landlords do, irrespective of whether you are a landlord of
ours, a landlord with another agent or a DIY landlord, if you see any property
in Cheltenham, that catches your eye as a potential buy to let property, be it
a terraced house, semi or flat ... email me and I will email you back with my
thoughts . I will tell you what you need to hear .. not want to hear.
email me on neil.west@belvoir.co.uk
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