What to look for when buying an investment property in Exeter

I was talking to a landlord recently who asked for my opinion on what to look for when purchasing a Buy-to-Let property. 

One piece of advice I was able to offer was that a good property should sell easily when you need to release funds. So, if you are a landlord considering buying a property to let out, you want to buy a property that is saleable.

There are a number of ways you can work out how saleable a property is, for example, how long properties on a road or area have taken to sell in the past and the amenities nearby.  There can also be a vast difference in the number of properties sold in an area in relation to the property stock.

Taking the number of properties sold in a road in relation to property stock first of all, looking back from January 1995, we can see that one of the highest turnover areas in Exeter is Clyst Heath, with the number of transactions here being around 138% higher than the number of residential properties in the area.  With an average gross yield of around 4.1% the area makes a fairly reasonable return on the investment and properties here usually let very quickly.  I find we get lots of interest for properties to let around Clyst Heath, the access to the M5 is excellent and the school is very sought after.

At the opposite end of the scale New North Road, which is predominantly made up of the apartments in Isca Place and larger properties opposite, has had 76% fewer transactions compared to stock.  This could possibly be because the apartments have been mainly bought by investor landlords who have kept hold of them due to their good gross yield of around 5.1%.  Being in the city centre the apartments in Marcus House are very popular for post graduate students and we rarely find them staying up to let for long.  Constantine House has larger apartments which attract sharers and families so no matter what your budget is, there will be demand for the property when it comes up for let.

Both of these areas have good amenities nearby, whether it is supermarkets, large employers, schools or public transport, so they will always let very well and have high demand.  Where there have been few property transactions there are likely to be many buyers waiting in the wings to catch any new properties coming to the market, similarly where there have been more transactions, it is likely this demand will have remained the same, so whether there have been many transactions or few, this should not drastically alter the saleability.

The length of time properties have taken to sell can also vary considerably, however this is largely affected by the price of the property and the current market conditions.  Come and talk to us if you are considering buying, selling or letting a property and we can provide more detailed information specifically for you. Please view our website www.martincoexeter.co.uk for our current sale properties.

Deposits… The Facts…

As part of the Housing Act 2004 the government introduced tenancy deposit protection for all assured shorthold tenancies (ASTs) in England and Wales where a deposit is taken.  

From April 6^th 2007, all deposits paid under an AST should have been protected within 14 calendar days of receipt by the landlord and from 6^th April 2012, deposits for all ASTs in England and Wales must be protected with 30 calendar days of receipt by the landlord, this change is a result of the Localism Bill 2011.

The aim of the legislation is to ensure that tenants who have paid a deposit to a landlord or letting agent and are entitled to receive all or part of it back at the end of that tenancy, actually do get back the amount to which they are entitled.

Who is affected?

The legislation covers virtually all new AST contracts through which private landlords let property in England and Wales; however the following will not need to be registered with a tenancy deposit protection scheme:

·          Company lets.

·          Student accommodation let directly by universities or colleges.

·          Resident landlords (those living in the property).

·          Landlords with tenancies over £100,000p.a.

Deposits taken before April 2007 do not need to be protected by a scheme such as the DPS; however if an existing tenancy is renewed and a landlord agrees to a new fixed-term tenancy, the initial deposit taken must then be lodged with a tenancy deposit protection scheme.

Why is legislation needed?

The return of a deposit at the end of a tenancy is by no means guaranteed, for example according to the DPS in 2008/9:

·          70% were returned in full.

·          17% were returned in part.

·          13% were not returned at all.

Nearly 1 in 5 (17%) of tenants who had some or all of their deposit withheld felt that it had been withheld unjustifiably.  The new tenancy deposit protection schemes will ensure all landlords safeguard the deposits they take, which is in every landlords and tenant’s interests.

The future of the Exeter property market

There are many reasons why people see buy-to-let as a good medium term investment option.  There is a shortage of housing nationally and unless we start building on an extensive scale, it is only going to get worse. 

People’s lifestyles are changing and more people are now living alone, or in smaller family units, which adds to this demand. Pensions don’t seem to be delivering as they used to, so people are looking for other ways to fund their later life. It seems inevitable that as time goes on, the taxman will show a greater interest in buy-to-let, but that doesn't stop an increasing number of people ploughing in on a monthly basis.

There are many reasons why the long term demographics of Exeter make buy-to-let investment here an attractive option. The city is large, established, and conveniently situated as a hub for the South West.

There are excellent respected employers here too, the Met Office, Exeter Royal Devon & Exeter hospital, South West Water and Exeter University to name just a few. The schools, especially St James, St Luke’s, Isca and Clyst Heath Primary are huge magnets to the city and people shouldn't underestimate the importance of them.

A diverse city such as Exeter gives rise to a number of investment options too. There have been a large number of new houses built here over the last decade, including developments at The Rydons and Cranbrook and these are always popular with tenants. There’s a solid Victorian Terrace market – the staple rental territory of many UK towns. Equally, we have a number of areas of ex-local Authority properties which offer high yields and enjoy constant tenant demand.

Prices are pretty competitive as well. Two bed houses are the bread and butter of any rental market, and these range from about £130k in one of the cheaper areas of town, to £180k in one of the nicer new areas. For £160k to £200k you'll get something very rentable in an area you feel comfortable with.

In short ...  the long term prospects for Exeter look very good, although as there are no guarantees, it is certainly worth coming to see us to get advice on the best areas for you to buy.

Exmouth vs Dawlish

The comparisons between two coastal towns, from one side of a river to the other, can be quite remarkable, especially if you are looking for capital growth.

Following my feature in the June edition about average property values in Exeter increasing by £227 per week over the last 12 months, a couple visited our office to discuss potentially investing in a property to rent out for the first time.

They were particularly keen for the property to be in one of the coastal towns near Exeter, such as Exmouth or Dawlish. 

When I did some research into these areas I found the average property price in Dawlish is currently £217,118, which is around 3.3% lower than a year ago.  In contrast, the average price in Exmouth is £243,269; this has increased very slightly by 0.04% over the same time.  

If capital growth is what you are looking for then neither town is ideal, considering Exeter has increased by around 4% over the same time, however as Dawlish prices have gone down (possibly due to the recent floods), Exmouth is then the one to go for to protect against a devaluing portfolio. 

It is important to consider the average rents in each area, as well as the initial value of the property, and what you are expecting from your investment. Considering rents in Exmouth have a yield of around 11% higher than Dawlish, this adds to the evidence that Exmouth should be the preferred choice for an investment property.  If you are looking to move to Dawlish, then the benefits of the main train line, lovely beach and Black Swans may be more of a draw.

The property market is dynamic, so it is important to do thorough research before committing.  If you would like to talk to us about buy to let, please feel free to visit our office on South Street.

How affordable are Exeter properties?

Potential landlords often ask us, is now a good time to buy an investment property in Exeter?  When buying something as valuable as a property in a changing market, it is worth checking the facts and figures very carefully.

Last week I had an interesting discussion with a potential landlord who lives in Exwick. He is thinking of purchasing his first buy-to-let property and he wanted my opinion on the state of the Exeter property market and if it was a good time to invest. 

He was particularly worried that with all the newspaper headlines of a booming housing market, there wouldn’t be any demand by tenants.

To put things into perspective I thought it would be worth looking at earnings compared to property values to see how affordable properties in Exeter actually are.  I found that properties in Exeter currently have an average value of around £252,499 with the average salary in 2012 being £23,155. This is a ratio of around 1 to 10.9, which is a wider gap when compared to the UK National average of 1 to 9.46. 

It seems the issue is becoming both affordability and the raising of the 5% or 10% deposit, which when you take into account fees, will be in the order of £15,000-£30,000.  The good news for landlords and this gentleman is while buyers can’t get on the housing ladder, they will have to stay in rented accommodation.

If you are considering buying a property to let in the Exeter area, come and see us at our Martin & Co office on South Street.

The future of the Exeter property market

There are many reasons why many people see buy-to-let as a good medium term investment option: There’s a shortage of housing nationally and unless we start building on an extensive scale, it’s only going to get worse. 

People’s lifestyles are changing and more people are now living alone, or in smaller family units, which adds to this demand. Pensions don’t seem to be delivering as they used to, so people are looking for other ways to fund their later life. It seems inevitable that as time goes on, the taxman will show a greater interest in buy-to-let, but that doesn't stop an increasing number of people ploughing in on a monthly basis.

There are many reasons why the long term demographics of Exeter make buy-to-let investment an attractive option. The city is large, established, and conveniently situated as a hub for the South West.

There are an excellent number of respected employers here too. The MET Office, Exeter RD&E hospital, South West Water and Exeter University to name a few. The schools, especially St Peters, St James, St Lukes, Isca and Clyst Heath Primary and are huge magnets to the town and people shouldn't underestimate the importance of them.

A diverse city such as Exeter gives rise to a number of investment options too. There’s been a lot of property built in the last 10 years, which is always popular with tenants, such as The Rydons and Cranbrook. There’s a solid Victorian Terrace market – the staple rental territory of many UK towns. Equally, we have a number of main areas of ex Local Authority properties which offer high yields and enjoy constant tenant demand.

Prices are pretty competitive as well. Two bed houses are the bread and butter of any rental market, and these range from about £130k in one of the cheaper areas of town, to £180k in one of the nicest new areas. For £160k to £200k you'll get something very rentable in an area you feel comfortable with.

In short ...  the long term prospects for Exeter look very good!