Well my Grantham Property Blog reading friends, as seems to
be all the rage with Jeremy Corben asking the PM questions emailed in to him at
Prime Minster Question Times, I to wish to answer a question emailed into me
from a potential Grantham landlord last week. Nice chap, lives in Manthorpe,
and it turns out, after having a coffee with him, he works in IT, has a spare
bit of cash (now the kids have flown the nest) and wanted to buy his first buy
to let property.
His main question was ... Do I buy
a freehold house or a leasehold flat in Grantham?
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 Grantham tenants want in the area
of Grantham 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 Grantham 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 is that there is often no
garden to maintain or blown down fences to replace!
However, some Grantham 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 Grantham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
However, some Grantham 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 Grantham 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 Grantham (detached, semis and terraced) has risen
from £98,130 to £139,735, a rise of 42% whilst the average Grantham leasehold
property (flats and apartments) has gone up in value from £47,920 to £81,728, a
greater rise of 71%.
I was really interested to note that of the 7,653 rental
properties in the South Kesteven District Council area that the Office of
National Statistics believe are either let privately or through a letting
agency, 1,693 of them (or 22.1%) are apartments. However, there are only 5,041
apartments in the whole council area (be they owned, council rented or
privately rented), which represents 8.8% of the whole housing stock in the
area. This really intrigued me that, quite obviously, there is a high
proportion of Grantham’s leasehold apartments/flats rented to tenants compared
to detached, semi’s or terraced. Fascinating don’t you think?
Every Grantham apartment block, every terraced house or semi
is different. Like I said at the start, the definitive answer though is to
research what Grantham tenants want in the area of Grantham they want. Demand
for town centre apartments, near good transport links can
be popular and can offer the Grantham landlord very good yields with minimal
voids. However, Grantham terraced houses and semis, whilst not always offering
the best yields (although sometimes they can), they do offer the Grantham
landlord decent capital growth.
My advice to the prospective landlord as it is to you is do
your homework. One such website, which
only talks about the Grantham buy to let Property Market, is the Grantham
Property Blog. Another source of info many Grantham landlords use is me! What
many Grantham 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 Grantham,
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
(although I will tell you what you need to hear .. not want to hear!)
