Well, my Solihull Property Blog reading friends, as seems to
be all the rage with Jeremy Corbyn asking the PM questions emailed in to him at
Prime Minister’s Question Time, I too wish to answer a question emailed into me
from a potential Solihull landlord last week. A nice gentleman who lives in Elmdon
Heath and it turns out after having a coffee with him, he works in IT, has a
spare bit of cash (now his children 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 apartment in Solihull?
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 tenants requirements are in the
area of Solihull they are considering! The tenant is ultimately your customer
and if they don't want to rent what you decide is the best to buy property,
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 apartments in Solihull are excellent in some
respects as they offer the landlord certain advantages, including the fact an
apartment 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 Solihull leasehold apartments can suffer from poor capital growth. Some 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 Solihull apartments have burdensome clauses. Finally with leases, there can be sub-letting issues – which means you can’t let them out.
However, some Solihull leasehold apartments can suffer from poor capital growth. Some 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 Solihull apartments 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 Solihull (detached, semis and terraced) has risen
from £216,259 to £347,095, a rise of 38% whilst the average Solihull leasehold
property (apartments) has gone up in value from £123,584 to £162,576, a slower
rise of 32%.
I was really interested to note that of the 7,795 rental
properties in the Solihull Metropolitan Borough Council area that the Office of
National Statistics believe are either let privately or through a letting
agency, 3,296 of them (or 42.3%) are apartments. However, there are only 15,360
apartments in the whole council area (be they owned, council rented or
privately rented), which represents 17.8% of the whole housing stock in the
area. This really intrigued me that, quite obviously, there is a high
proportion of Solihull’s leasehold apartments rented to tenants compared to detached,
semi’s or terraced. Fascinating don’t you think?
Every Solihull apartment block, every terraced house or semi
is different. Like I said at the start, research what your tenants requirements
are in the area of Solihull they are considering. Demand for town centre
apartments near transport links can be popular and can offer the Solihull
landlord very good yields with minimal voids. However, Solihull terraced houses
and semis, whilst not always offering the best yields (although not always the
case), do offer the Solihull 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 Solihull buy to let Property Market, is the Solihull
Property Blog. Another source of info many Solihull landlords use is me! Now is
a really good time to buy property, as demand is outstripping supply. What many
Solihull 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 Solihull,
that catches your eye as a potential buy to let property, be it a terraced
house, semi or apartment ... is to 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!)
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