Welcome to the first ‘BTL Gems’ article.
This series of articles will follow the BTL market in East London where I will pick out good deals that you can invest in. I will break down the yield, upfront costs and running costs, so as a BTL investor you can fully know what you are getting yourself into.
In this months edition I have chosen the following property:
This is a 2 bedroom property in Shadwell, E1 and marketed by Smart Property. As you can see it’s on the market for ‘offers over £325k’. It’s been on the market since 10th September 2020 and reduced on 12th March 2021 from £350k. When a property has been on the market this long, it means 1 of 2 things. Either the seller is not a serious seller or its been on the market too long and the adverts become stale. If it’s the latter then a deal may be there to be had.
Although I think there is some negotiation to be done here, let’s go with the £325k purchase price to calculate the figures you need to know.
This property will rent to the local authority for £1585 fairly easily. And if in a decent condition will fetch around £1700-1800 pcm on the private market.
It needs some light cosmetic work and because theres no kitchen and bathroom pics, its hard to tell how much work is needed there. Usually when theres no kitchen and bathroom pics its because its better you don’t see them.
Before I get into the numbers take a look at the table below. This is something I fill out every time I’m interested in a property. Seeing the numbers laid out like this always helps me see things a bit more clearly.
At £1,585 pcm you are looking at a tidy 5.85% yield. As a HMO I believe you can hit the 7-8% mark no problem, where rooms are rented between £700 and £800 pcm including the living room. This is good as the average in London is below 5% at the moment.
Always remember to factor in the service charge for leasehold properties when working out your net profit. I would also factor in a small margin on lettings agency costs and building maintenance costs.
1 bed Properties in the same building on the market for £300k so buying a 2 bed for £325k is not so bad when we usually see at least a £50k difference between 1 and 2 beds like these.
At £325k a BTL investor would typically look at putting down £81,250 as a deposit and a £16,000 stamp duty fee.
I expect properties like this to see great capital appreciation over the next few years when we see the real bounce back from covid and Central London is back in full effect. Not so long ago, 2 bed ex local properties in this area were marketed between £400-425k.
I hope this article brought you some value or insight into the East London BTL market. I will aim to get you at least 1 BTL Gem every month so do let me know if there’s a specific property that is on the market right now that you would like me to break down.