Do I buy a studio, 1 bedroom, 2 bedroom or 3 bedroom property in Dunstable for my first or next Investment? They all have their merits but are some more favourable than others.
Last week a landlord with properties in Dunstable stopped at our shop when he saw me sitting there. He had been following my blog about the Dunstable and Houghton Regis property market and thought he would pick by brains whilst waiting for his wife to finish shopping. He isn’t one of our landlords and I couldn’t say he will become one, but talking with an experienced landlord is not a one way conversation and we both finished with more knowledge than we started with.
He wanted to discuss the merits of various property types as he had focused on 1 bedroom apartments previously and wasn’t sure this was a strategy he should follow. For the last 6-8 months the demand for 1 & 2 bedroom properties has been high due to the local employers taking on more staff including Amazon who opened their fulfilment centre in October and employed 500 staff. These numbers are going to increase greatly this year as they will also be opening larger premises in front of the one that opened in October. All good news for this landlord.
We took a look at how various property types had performed so far this year so he could make a decision on the next property he is going to buy.
I started on the lower end of the market the studios and 1 beds of which he is familiar. Studio apartments rent figures don’t change price too much as they normally serve an immediate need for someone and the tenants will often move on after 6 months. They usually require the studio furnished unlike the typical property in Dunstable and Houghton Regis which is unfurnished. The typical price of studio apartments this year had ranged from £450-£500pcm.
We then looked at the 1 bedroom apartments, a property type he was very familiar with. These had ranged in price from £500-£750pcm with one exception currently on the market at £800pcm. Modern 1 bed apartments in developments such as Bramley Court and The Parklands were renting for £650-£700pcm with a few niche properties fetching £750-£775pcm. Looking at the average price for 1 bedroom apartments currently on the market (£140,000) a typical rental yield of 5.79% was going to be achievable before costs including service charges.
His current thinking was to step up to the 2 bedroom apartment market so we took a look at their performance this year. Currently the average price for a 2 bedroom apartment is £168,000 and the average rental figure is £800pcm giving a rental yield of 5.71% before costs including service charges. I had noticed that some 2 bed apartments are now pushing £900pcm with one listed at £1000pcm on the McCann Homes redevelopment on West St in Dunstable. Other 2 bedroom apartments on the same development have been advertised at £875pcm. We could see that new build 2 beds with ensuites were being marketed at £900pcm whilst older, but still modern 2 bedroom apartments with ensuites were being marketed at £800- £850pcm. The prices of 2 bedroom apartments in modern developments with ensuites and 2 double bedrooms have probably increased by a higher percentage than other properties in Dunstable the last 12 months.
We then compared this to the 2 bedroom houses which are highly sought after by tenants and investors alike and we found the average price for a 2 bedroom house was currently £215,000 with the average rental figure of £850pcm giving a typical rental yield of £4.74%. ( No service charge to include ) The rental figure for 2 bedroom houses had ranged from £800 - £925pcm so far this year but something to be wary of with houses on new developments is the current trend for developers to offer these on leases with a service charge and not freehold. Many investors prefer purchasing houses as they own the freehold and don’t have a service charge.
There have only been about 20 two bedroom houses marketed for sale on Rightmove so far this year whilst there has been a choice from nearly 90 two bedroom apartments.
His next option was of course to look at buying a 3 bedroom house instead. He was in the market for purchasing 2 apartments, but what if he changed his strategy and bought just the one house? We discussed the various obvious merits of 3 bedroom houses that tend to attract longer term family tenants, but also the extra wear and tear on the property. You can expect to redecorate and maybe replace the flooring more often if a family are living in your property.
The average 3 bedroom house price was currently £280,000 with an average rental price of £1050pcm giving a typical rental yield of £4.5%. The range in the rents that have been requested this year was quite broad ranging from £795 to £1250. If he was going to investigate this option he was going to have to carry out plenty of research first and with my help identify the right property to buy.
This exercise with him just goes to show that if you buying a a property to let out, you need to know all the numbers involved before making that decision. I don't sell houses and don't charge for my opinion, so feel to pop round my shop on Church Street in Dunstable or ask me for a FREE invite to the monthly Property Investors Network meeting in Luton (Luton PIN).
My message to all investors would be to take some independent advice before purchasing, unless you're 100% sure of what you're doing. I say this because I know what happens when people don't. Even if it's not from myself, there are still a few regulated agents in Dunstable and Houghton Regis who are well placed to advise on whether the property you're buying will rent, and at what price. I’m certainly more than happy for you drop by my shop to talk about your various options including your existing properties. Meanwhile the landlord has since asked my opinion on 3 apartments one of which he is now proceeding to purchase.
Could Brexit effect UK property market and more importantly your property in Dunstable, Houghton Regis, Leighton Buzzard and the surrounding areas ?
I am yet to be convinced that an economist’s long term prediction is to be relied upon. Yes in the short term maybe up to 2 years it is possible to predict fairly reliably what is likely to happen, but longer than 2 years and history shows that predictions are usually incorrect, are then blamed on unforeseen influencing factors and new predictions produced. There will always be ‘unforeseen influencing factors’ just ask a weatherman to predict next week’s weather.
Most economists and articles discussing the effect Brexit will have on the property market are based on the London property market both commercial and residential. Why would they be bothered about what will happen in Bedfordshire, Cheshire or Yorkshire ?
The London property market has seen huge investment and purchasing from Russian and Chinese millionaire’s and rich eurozone citizens looking to escape the sovereign debt crisis. In the last 10-15 years they have often bought off plan a property that they might even leave empty. Indeed 49% of investors in central London property are foreign. If as predicted by the economists the value of Sterling should fall those already invested in London may choose to sell up rather than watch their assets lose value.
Last week the Bank of England and International Monetary Fund both highlighted the risk to house prices if there was a Brexit, but previously both of these have raised as a key concern for the UK economy the rising house prices in the UK ?
For the local property market the impact if any is likely to be minimal with the most likely outcome to effect property owners being a rise in interest rates. In fact as reported in a previous article, there has been some slowing of the property market recently and if you look at the numbers you can see that this started over 6 months ago well before the referendum was announced in February.
If we look at the property prices over the last 12 months in the Hemel Hempstead area we can see that they had risen by about 1.6% but more recently they had fallen by about 0.6% over the last 6 months.
If we look closer to home in the Dunstable and Houghton Regis areas we can see than over the last 12 months house prices had risen by about 7% outperforming the markets closer to London as home owners and investors priced out of the London market found affordable property in this area. Over the last 6 months the average property prices have fallen by about 0.5% in line with the property prices noted above in Hemel Hempstead. This we could put down to a number of factors such as a cooling of the property market, buyers waiting to see what happens in the referendum vote and the stamp duty changes at the beginning of April. Compare this to the 7% rise in the previous 12 months and this can probably be seen as a levelling off with the gains achieved in the last few years being held due to the continuing demand of the London buyers and renters looking for somewhere more affordable.
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Dissatisfied with your current letting agent? Landlords you can change to a better service in 7 easy steps
It is not surprising to us that having firmly established ourselves in Dunstable we have started to attract many Landlords seeking advice and ultimately a better service than they receive from their current Letting Agent.
We have recently found quite a number of Landlords approaching us who are unhappy or dissatisfied with their current Letting agent, and have been asking us how to go about moving management of their property to us. If you have a property in Dunstable, Houghton Regis, Leighton Buzzard or the surrounding areas and are unhappy with your current Letting agent then why not switch? It may feel like a lot of hassle but we can do most of the work for you. Below is a brief step by step guide explaining how to go about moving from your current Letting agent if you are unhappy with the service they are providing.
Daniel Bourke is the owner of Belvoir Lettings Dunstable and in his previous career in Architecture he was an Associate in a leading London Architectural practice