I had an interesting email a few weeks ago that I want to share with you. In a nutshell, the gentleman lives in Cheltenham , 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 £250,000. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £4,750 in interest a year. One of his other options was to buy a property in Cheltenham to rent out and he 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 Cheltenham landlords being waged by George Osborne, 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. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.
I told him that buying a Cheltenham 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 £4,750 a year or, as he rightly suggested, invest in property in Cheltenham. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Cheltenham is 3.58% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £8,950 a year.
The bottom line is that the success of investing in Cheltenham 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 with a savings account, 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 Cheltenham have risen in the last twelve months by 4.5% meaning, that if our chap had bought a year ago, not only would he have received the £8,950 in rent, but also seen an uplift of £11,250 …meaning his overall return for the year would have been £20,200 (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 ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Gloucestershire currently stand 0.14% below the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Cheltenham, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.
… and what would that £250,000 get you in Cheltenham? A very nice 3 bed semi in Hatherley, a stunning 3 bed apartment within Park House or a luxury 2 bed duplex apartment in the heart of Cheltenham .. in fact, the world is your oyster. But which Oyster? For good, sound advice as what to buy in Cheltenham , please call me (01242 221188 ) or drop me an email neil.west@belvoir.co.uk
No comments:
Post a Comment