Update: We've moved our blog to www.folkestone-estateagent.co.uk
I had an interesting email from
someone in Folkestone a few weeks ago that I want to share with you (don’t
worry I asked his permission to share this with you all). In a nutshell, the
gentleman lives in London, he is in his mid 60’s and still working. He has a
decent pension, so that when he does retire in a couple of years’ time, it will
give him a comfortable life. He had recently inherited £185,000 from an elderly
aunt. One option he told me was put it into a savings account. The best he
could find was a 2 year bond with the Post Office which paid 1.9%; meaning he
would get £3,515 in interest a year. One of his other options was to buy a
property in Folkestone to rent out and he wanted to know my thoughts on what he
should buy, but he had concerns as he didn’t want to take a mortgage out at his
time of life. He was also worried about all the tax changes he had read about
in the papers for landlords.
Notwithstanding the war on Folkestone
landlords being waged by George Osborne, the attraction of bricks and mortar
endures for many. As our man is a cash buyer, he would not have to deal with
the intricate cut to
mortgage interest tax relief that will diminish,
or even eradicate, the profits of many Folkestone landlords. It’s true he would
face the extra 3%
in stamp duty to buy a second property, but with
some good negotiation techniques, that could soon be mitigated.
I told him that buying a Folkestone
buy to let property is all about the total return on investment. True, he could
put the money in the Post Office bond and receive his interest of £3,515 a year
or, as he rightly suggested, invest in property in Folkestone. The average
yield (yield being the equivalent of the
interest rate on the property) at the moment in Folkestone is 3.74% per
annum, meaning our potential F.T.L (First Time Landlord) should be able to,
depending on what he bought in the town, earn before costs £6,919 a year. (However, I told him there are plenty of
landlords in Folkestone earning half as much again (if not more), if he was
willing to consider more specialist investment types of properties – again, if
you want to know where – look at my blog or drop me an email).
The bottom line is that the
success of investing in Folkestone buy to let property versus a savings account
with the Post Office (or whatever Bank or Building Society is offering the best
rate) will depend on the performance of those assets. Unlike with a savings
account, with property the capital you invested can also go up (and yes, it can
go down as well – more of that in second). Property values in Folkestone have
risen in the last twelve months by 8.4% meaning, that if our chap had bought a
year ago, not only would he have received the £6,919 in rent, but also seen an
uplift of £15,540 …meaning his overall return for the year would have been £22,459
(not bad when compared to the Post Office!).
..
but the doom mongers amongst you will say, property values can go down,
as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had
bounced back to their ’79 levels by 1984 and went on to grow an additional 58%
in the following four years. Then again, they dropped in 1988 and did take 13
years to reach back to those ’88 figures, but the following six years (between
2001 and 2007) they then increased by an additional 66%. Now, according to the
Land Registry, average property values in Kent currently stand 10.42% below the
January 2008 level, and anecdotal evidence suggests that in the nicer parts of Folkestone,
we are well above these sorts of levels. Therefore, all this talk of property
crashes is unfounded.
… and what would that £185,000 get
you in Folkestone? A superb 2 bed apartment in West End, a lovely 2 bed terrace
in Cheriton or a stunning 2 bed apartment with sea views in Sandgate .. in
fact, the world is your oyster. But which Oyster? Well, my blog-reading
friends, if you want to read similar articles like this and what I consider to
be the very best of buy to let deals in Folkestone, irrespective of which agent
is selling it, scroll back to the top and subscribe by email!