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Article > Portfolio Building


Article kindly supplied by Alan Forsyth


Property Investment Tips
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Nottingham, NG1 3BT
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The basic idea behind investing in buy to let, is buying a property that you will be able to rent out, to either get an income from or pay off any borrowing taken out against the property when you buy it, and then enjoy the mid-term capital growth.


So where are the best places to invest in the UK for buy to let?
Well as with any investment, you are looking for the strongest return on investment. So with rental property you will generally be looking for highest rental return based on the property value i.e. the yield.

Let's look at 2 examples...

Hartlepool
Average 2 bed house - £70,000 and rent is £425pcm i.e. a rental yield of 5100 per annum divided by 70000 i.e. 7.3%.

Cheltenham
Average value of a 2 bed house here is £180,000 and rent is £700pcm i.e. 8400 per annum divided by 180,000 i.e. 4.7%.

So based on rental return I will get 50% more return in Hartlepool than Cheltenham if I buy the average 2 bed house in the area.

Whether I am taking out a mortgage or not this rental return is very important clearly when defining your return on investment. So in general we would recommend areas where you can get a rental yield of over 7%. Over 10 properties 2% difference makes a huge difference to your return. E.g. on a 500k portfolio an extra 2% is £10,000 a year extra income.

This rules out quite a few parts of the UK, when deciding where to invest in Buy to Let even with prices dropping in some of these areas - unless you go for HMOs which come with plenty of headaches and voids and more hands on management.

We prefer 2 and 3 bed houses or tenement flats in Scotland often giving us 8-10% yield - they put far more money in your bank account every month than a couple of 200k houses in Cheltenham.

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Spotlight on Hull

Another city that ourselves and many of our investors, either buying individual properties or as part of our Portfolio Building Programme (for more info in this click here) have seen some good returns in is Hull which has a lot going for it right now.


The city, with a population of around 250,000 and on the east coast of England, remains a busy port, handling 13 million tonnes of cargo per year. Freight handling at the port is projected to rise following Network Rail’s investment of £14.5 million in the rail link, which was completed in mid-2008.


The port operations run by Associated British Ports and other companies in the port employ 5,000 people. A further 18,000 are employed as a direct result of the port's activities. The port area of the city has diversified to compensate for the decline in fishing by the introduction of Roll-on Roll-off ferry services to the continent of Europe. These ferries now handle over a million passengers each year. Hull has exploited the leisure industry by creating a marina from the old Humber Street Dock in the centre of the city. It opened in 1983 and has 270 berths for yachts and small sailing craft.

Industry in the city is focused on the chemical and health care sectors. Several well-known British companies, including BP, Smith & Nephew, Seven Seas, and Reckitt Benckiser, have facilities in Hull. The health care sector is further enhanced by the research facilities provided by the University of Hull through the Institute of Woundcare and the Hull York Medical School partnerships. In August 2010 a 110% increase was reported in tourism enquiries to the city, with Hull becoming an increasingly popular destination for "staycation" short breaks.

Overlooking the Humber, the new £165 million Humber Quays development, which has now gained World Trade Centre status, is adding new high-quality office space to Hull's waterfront. Kingston upon Hull is also home to the University of Hull, which was founded in 1927 and received its Royal Charter in 1954. It now has a total student population of around 20,000 across its main campuses in Hull and Scarborough.

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The following shows us that during 2011, Hull has Continued to see strong Investment

Siemens' decision to build an £80 million turbine factory in Hull marks a major milestone in the city's history. Industry on this scale has not been seen in the city for decades. The Siemens factory could generate up to 10,000 new jobs in the region and will feed into the biggest wind farms the world has ever seen. It will be built on 130 acres of Associated British Ports (ABP) land at Alexandra Dock. As part of this project ABP are to construct a £100 million riverside berth at the dock which represents the biggest investment by the company since they built the docks. Siemens' factory and export facility will supply the Dogger Bank, Hornsea and Norfolk Bank wind farms which all lie within 12 hours steaming time of Hull. These round three North sea wind farms are set to be the biggest in the world with a combined total of 5000 wind turbines - more than the rest of the world put together. They will generate 20,000 megawatts (MW) of energy, enough to power about 15 million homes. Under the government's targets for 20 per cent of energy to come from renewable sources by 2020 these wind farms will need to be up and running in less than ten years. With Siemens, the world's biggest turbine manufacturer coming to Hull, it is likely that most of these turbines which could reach up to 175 metres in height and generate 6MW, will be assembled and shipped out of the city. Under the current plans, construction on both the Siemens factory and the riverside berth will start in early to mid-2012 and will take 18 months to two years to complete. Several hundred construction jobs will be created during this period. About 700 jobs will be available in the factory once it is up and running and it is thought that another 9000 could be created within supply chain and servicing industries. It is hoped that with the world's leading turbine manufacturer moving to the city, other related industries could follow transforming Hull and the Humber into a hub for renewable energy. Adapted from an article originally published by thisishullandeastriding.co.uk

ABP and Hull City Council have identified 918 acres of land along the Hedon Road corridor which could be used for future development. The long term aim of stakeholders like ABP and Hull and East Riding councils is to create a 'cluster' of renewable industries in this area. So we feel Hull is a good sized city to target, and has plenty of economic opportunities that can allow further growth from a very affordable starting point.

One of the concerns clients have investing out with their area is, who will manage the property?
And what if repairs need to be carried out?

Well here we have the perfect solution.

How about securing property at a minimum of 7% rental return, at a 20% discount to a current RICs valuation, fully refurbished including:

  • New double glazing
  • New central heating
  • Replastered
  • New bathroom
  • New Kitchen
  • New carpets or tiling

So maintenance issues are a minimum, for the foreseeable future.

Then the rental concern, what if no one moves into my property?
How about we also cover the mortgage payments until a tenant moves in? This should only take 4-6 weeks but gives you that extra confidence as well.

So you can build up a portfolio with confidence of properties providing a healthy monthly positive cashflow, below current market value and fully refurbished!

Hull provides us with some of the best value properties of any city in the UK, and with the ongoing investment going into the city this is expected to continue.

To find out more on our Portfolio Building Programme, with 10 new places becoming available on June 1st, to book a Viewing Trip in Hull or to see all our Property Investment Deals Register your details here.

I look forward to working with you!

Regards

Alan


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Alan Forsyth 

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Alan Forsyth and his team will be discussing their UK deals including opportunities in Hull and the North East and his Portfolio Building Package at his Edinburgh Seminar on Wednesday 15th June 2011 and his London Property Presentation on Wednesday 22nd June.

Both events are informal, completely free and include networking opportunities before and after the 7pm start.

For more information, email info@property-investment-deals.com or
call 0115 985 3969.

 

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