Buy-to-let – is it better to invest in an £80,000 or a £250,000 property?

Local estate agent Pendle Hill Properties have witnessed a significant shift in buy-to-let property investment with an increase in investors purchasing new build properties.

Buy-to-let investors may more commonly be associated with purchasing cheaper properties with 54 per cent of buy-to-let properties in the UK being terraced houses (Source: BVA BDRC via Paragon Bank), but recent changes have seen buy-to-let landlords switching their attention towards new builds valued at £250,000 and above.

Research from the ‘English Private Landlord Survey’ found that 42 per cent of landlords became a landlord because they wanted to invest in property. A figure that comes as no surprise, with statistics from Uswitch showing that there are currently around 2.74million landlords in the UK.

The demand for buy-to-let investment is still high, but with the increase in new legislation and regulation, investors are starting to look at things a little bit differently.

From annual safety checks to landlord’s insurance and EPCs, the costs of being a landlord are not decreasing, so many buy-to-let landlords are looking at different ways in which they can make their investment more profitable.

Purchasing a new build property will offer a long-term investor a more hands off investment, due to fewer problems arising than an older property, while the warranties offered by new builds are also providing a very attractive proposition for investors. Not only that, but investors are also looking closely at location, which in the longer term will determine the capital growth.

A key shift in the investment, witnessed by Pendle Hill Properties, has seen more investors acquiring new builds to add to their buy-to-let portfolios. Not only are these properties brand new, but are often located in sought after areas, where demand is high, and where renters are willing to pay what is required to live there.

Moving away from terraced houses, and instead to new builds, is producing bigger returns for investors in the long term.

While a landlord may recuperate a higher percentage of their initial investment over a 10-year period when purchasing an £80,000 property, compared to a £250,000 new build, the increased costs of owning an older property and everything associated with that including maintenance and repairs, means opting for a new build buy-to-let is becoming more favourable.

For example, if an £80,000 property had annual rental income of £6,000 at a rental yield of 7.5 per cent, the investor would make £60,000 over a 10-year period.

If a £250,000 property had an annual rental income of £15,000 at a rental yield of 6 per cent, the investor would make £150,000 over a 10-year period.

While less sought after locations cost less and yield more, more sought after locations may cost more and yield less, but the appreciation they offer provides a more profitable opportunity for investors in the long term.

Rising property prices in more sought after areas can see your property increase in value year-on-year. Compare that to a terraced house in a much less sought after area and immediately, the return on investment is looking much more profitable on that £250,000 investment which you made 10 years ago.

Whether you are a landlord with a portfolio of one or ten, Pendle Hill Properties offer two comprehensive packages to help manage your properties. Their fully managed service includes everything from monthly rental collection to management of all maintenance issues, while their tenant finder service leaves you the landlord to have more control over the day-to-day tasks once your tenant has been found and the agreements signed.

To learn more contact the Pendle Hill Properties team by calling 01282 772 048 or by emailing [email protected]

For more information on Pendle Hill Properties, check out their website: www.pendlehillproperties.co.uk