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Dancing
Fountains with Five Swimmers Sculpture, Staines -upon-Thames
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I had
an interesting email from someone in Staines a few weeks ago that I
want to share with you (don’t worry, I asked his permission). In a
nutshell, the gentleman lives in Egham, is in his mid 60s and still
working. He has a decent pension, so already comfortably off when he
retires in a couple of years’ time. He has recently inherited
£330,000 from an elderly aunt.
One
option was to 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 £6,270 in interest a year. One of his other options was to
buy a property in Staines 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 Staines 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 cut to mortgage interest
tax relief that could diminish, the profits of many Staines
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 potentially be mitigated.
I
told him that buying a Staines 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 £6,270 a year OR, as he
rightly suggested, invest in property in Staines. The average yield (yield being the equivalent of
the interest rate on the property) at the moment in
Staines is 3.82% per annum, meaning our potential F.T.L (First Time
Landlord) should be able to earn, depending on what he bought,
£12,606 a year (before costs). However, I told him, there are plenty
of landlords in Staines earning half as much again if not more.
The
bottom line is that the success of investing in Staines 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 Staines
have risen in the last twelve months by 8%, meaning, that if our chap
had bought a year ago, not only would he have received the £12,606 in
rent, but also seen an uplift of £26,400 …meaning his overall return
for the year would have been £39,006 (not bad when compared to the
Post Office!).
But
you might 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 the
area currently stand 25.27% above the January 2008 level, and
anecdotal evidence suggests that in the nicer parts of Staines, we
are well above these sorts of levels.
No
guesses as to where I would put my money!
And
looking at what has come onto the market in Staines in the last two
weeks, £330,000 would buy you a very spacious two bed flat, a two bed
mid-terrace or a charming two bed cottage, all within a stone's throw
of the station, so Staines could very definitely be your Buy To Let
Oyster!
Written April 2016
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