Current List of UK BMV Properties for Sale
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House Prices for Repossessed Houses sold at Auction
The latest Allsop auction offered 1,100 properties for sale with 18 homes selling for less than £100,000. Lets take a look at the investment opportunity that this offers.
Lot 786 – Three bedroom flat in council block in Brixton. Estimated value in Oct 2007 was £180,000. Sold for £79,000 – Council flat, with its proximity to Brixton Station and Victoria Underground makes this a very cheap London purchase. When you take a look at asking rents for 3 bedroom properties in Brixton on the Gumtree.com the price varies but the lowest of the low is still around £220 per week.
Now lets take a look at this as an investment. In simple terms £220 per week = £11,440 per year, less vacancy of say 2 weeks you are at £11,000 per year. You must also take into consideration insurance and repair which might equate to £750 per year on average. Management fees? So you are netting approximately £10,250 per year. Therefore £10,250 / £79,000 = 13% yield. Which is excellent. Compare this to what you get in the bank and at some point this flat will rise in capital value. It looks like a good investment if you can get a mortgage.
Lot 101 – One bedroom flat in part timbered block in East Dulwich. Estimated value in October 2007 was £240,000. Sold for £100,000. Located in Zone 2 with 6 trains an hour to London Bridge. If you search through Gumtree.com for 1 beds in East Dulwich the lowest asking price is approximately £180 per week. This low rent equates to £9,360 per annum less vacancy of two weeks per annum, call it £9,000 per annum. Again, you must also take into consideration insurance and repair which might equate to £500 per year on average for this smaller property. Management fees? So you are netting £8,500 per year. Therefore £8,500 / £100,000 = 9% yield. Which is very good. It looks like a good investment, if you can get a mortgage at a rate of say 6.5% then you would be able to pay your interest off and some of the capital.
Lot 766 – Two bedroom flat in Victorian semi in Forest Gate. Estimated value in October 2007 £235,000. Sold for £95,000. Trains are direct to London Liverpool Station with typical off peak service of 6 per hour. Searching the Gumtree.com finds rental levels for 2 bed properties at an average low of £175 per week but this is a Victorian semi and if you search for that specifically in Forest Gate rental levels seem to be closer to £210. We will assume £195 per week which is £10,140 per annum, less vacancy of £390 (2 weeks rent) and repairs insurance of £750 and we net approximately £9,000 per year. Therefore £9,000 / £95,000 = 9% yield. Again very clean and easy investment not using wild assumptions.
We don’t know the condition of any of the properties. We have assumed reasonable condition but you should probably expect to pay a further £1,000 for the one beds and maybe up to £2,500 for the 3 beds to bring them up to rental standard. Maybe change the kitchen benches over, paint the walls and doors, buy some blinds and if your furnishing it, get some IKEA furniture. Or save money by doing it yourself, but remember every week its not complete you have lost that amount in rent. Time versus money is crucial when looking at investments.
Freehold or leasehold? Freehold is worth more as you do not have to pay any leaseholder a service charge yearly. If these are leaseholds with less than 80 years on the clock then automatic renewal of the lease has expired and you will have to take into consideration marriage value, so you could be up for an additional £3,000 to £8,000. So take a look at the lease expiry date.
Upon writing this, we do not feel that the rental levels could be looked upon as high. In fact we assumed the lowest levels for each product given its suburb when compared to the many entries at the Gumtree.com
So maybe its time to buy as house prices are low? Better than interest in the bank and then wait for the capital value to climb!
Please share your experiences on buying UK properties.