Is London the best BTL investment?

Is #London the best buy-to-let #investment? https://t.co/hj6p0YPDVK pic.twitter.com/0BhtDATwl7

— Estate Agent Networking (@EAUKNetworking) June 29, 2020

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Top 10 buy-to-let hotspots : Zoopla

We've crunched our data to reveal the top 10 buy-to-let hotspots in Britain. Can you guess which areas made the list? https://t.co/bBAMtclHwA @landlordnews @RLA_News @Landlord_Today @The_Landlord #buytolet #ThursdayThoughts pic.twitter.com/GwblevhyJw

— Zoopla (@Zoopla) March 21, 2019

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BTL - beats returns on gold, cash, fine art

Buy-to-let gives better returns than gold, cash and fine art https://t.co/AW54eEb7GK pic.twitter.com/d5BpwoFjLg

— Mortgage Introducer (@MortgageChat) March 20, 2019

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BTL remains a solid investment

Andrew Turner: Buy-to-let remains solid investment https://t.co/T6Y0PRbw4j pic.twitter.com/2nHllVPszF

— Mortgage Introducer (@MortgageChat) November 19, 2018

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BTL more profitable than 2 years ago

Buy to let more profitable than two years ago - economist - https://t.co/Jg08LHLHFI

— Mortgage Solutions (@mortgagesols) June 19, 2018

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Landlords should look at Liverpool

Why landlords should look to Liverpool for the best buy-to-let returns https://t.co/ASjTcZi2nQ via @SChristie_ @TotallyMoney

— Telegraph Property (@TeleProperty) June 18, 2018

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Landlords head north for better returns

Landlords head north to enjoy better returns https://t.co/lGIACOH4w0

— ARLA Propertymark (@arla_uk) June 13, 2018

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Prices outperforming rents - dipping BTL yields

House prices in the UK have been growing faster than rents - Savills Lawrence Bowles explains the impact that this has on buy-to-let yields in our latest blog post: https://t.co/5SxBRhzT1W pic.twitter.com/IvMa1GoVoK

— Savills (@Savills) June 6, 2018

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Is BTL still a sound investment?

Could landlords really earn £162,000 from buy to let? We take a look at the data and consider whether buy to let really does remain a sound investment >> https://t.co/Fl0aKF8IAJ pic.twitter.com/Stsi8d3Lgf

— Which? Money (@WhichMoney) May 17, 2018

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Cross Sector Property Outlook - 2018

Uncertainty will cast a shadow over the UK's economic growth through 2018, so where are the opportunities in real estate? New cross sector report: https://t.co/ytaIj9NKHc pic.twitter.com/g9hxykoEsk

— Savills (@Savills) December 12, 2017

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Which is the better investment - stocks or property?

Which is the better investment – stocks or property? @DominicFrisby attempts to answer the question once and for all https://t.co/U2Bim6uLFg pic.twitter.com/FJKrUVgM0w

— MoneyWeek (@MoneyWeek) October 12, 2017

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This years property hotspot is...Belper!?

Historic town of Belper named as #property hotspot of the year!! https://t.co/3XVmORkWyA

— Northwood UK (@northwooduk) July 20, 2017

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Landlords buying cheaper for yields

Landlords are purchasing cheaper high yielding properties https://t.co/DFWCGMRe3g pic.twitter.com/zKBGFIu0Nf

— Mortgage Introducer (@MortgageChat) July 12, 2017

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Property values per sq metre - UK map

Mapped! House prices per square metre, from brand new data https://t.co/IA1x9in4nL pic.twitter.com/QxZu4DwvbN

— Anna Powell-Smith (@darkgreener) April 13, 2017

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London's most profitable BTL postcodes

Revealed: London's most profitable buy-to-let locations: https://t.co/1XBIez8Qhl pic.twitter.com/S3cR3vgMgC

— ES Homes & Property (@HomesProperty) February 1, 2017

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Is it a good time to invest in BTL?

ICYMI: Is it a good time to invest in UK buy-to-let property? https://t.co/ZMn4BBCuud

— BizNews.com (@BizNewsCOM) January 26, 2017

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BTL returns map - Leeds comes out top

Buy-to-let can offer a return but you need to know where... https://t.co/A8UcnE5udE

— This is Money (@thisismoney) October 24, 2016

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Top of the buy-to-let investment market

I've recently come across this investment deal being advertised by a national auctioneer house.

The block in leafy Kent is obviously a conversion property (not always the best - depending on the quality of the building work)  Often historic conversions were carried out to much lower levels of noise insulation, fire safety and non compliant electrical standards than modern standards would demand. The details on the website are:

Ten self-contained flats extending to a total of 777 sqm (8,358 sqft)

    •    All flats fully let subject to Assured Shorthold Tenancies
    •    Total Current income of £106,661 per annum
    •    Potential for further residential development subject to obtaining all necessary consents
    •    Potential to increase rent when tenancies come to an end

Value of investment

To me the asking price and investment multiple indicate that we must be close to the top of the market.  The asking price of over £1.8 million on the current rent gives a gross rental yield of less than 6%.  If the landlord then takes of the management cost and associated costs of the investment of say 2% you are left with a sub 4% net yield.  This implies the expectation of a massive increase in capital value either through development or growth in house prices.  I can't see it myself and given the lurking dangers that interest rates on any loan used to buy the property can only go upwards the upside on the investment is FULLY priced into the valuation.  At this price this and other similar investment properties are not a screaming buy and reflect the strong investment demand for buy-to-let properties rather than any long-term sensible investment criteria.

These are only my thoughts as a hard bitten investor and former surveyor.  I have been wrong before and I'm sure will continue to be proved wrong in the future.

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The true value of property

There are several ways that landlords use to measure the true value of a residential investment:

Open Market Value (OMV)
Investment yield

However, a more fundamental measurement that is often used by economists in valuing businesses is the replacement costs. This is a useful tool because it gives us perspective above and beyond market conditions.

The replacement cost is simply how much a property would cost to build including the imputed value of the land on which it sits.

Build costs can be calculated using the BCIS figures. Add in a value for the land and take off any 'refurb' costs and we arrive at what that building would cost to build new. If the OMV of the property is less than the replacement costs a landlord has to conclude that subject to the other metrics - they have a pretty sound investment.

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How to stress test a potential new buy-to-let investment for free?

The financial phrase of the moment is 'stress testing'. This refers to the process whereby the bank's balance sheets are subject to various dire predictions about the performance of the economies and their loan books.

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Landlords looking at making additional investments should do their own 'stress test' on any future investments. They can do this using Property Hawks own development appraiser which will calculate a landlords likely long-term returns. This should be done using a variety of different investment scenarios including a set of pessimistic figures which are 20% below what a landlord would expect.

I would advise all landlords to 'stress test' their proposed investments before committing their valuable capital to a new buy-to-let property. In this current uncertain market with capital values continuing to fall I would also be looking at an investment return of 20%+. Thoroughly 'stress testing' your investment could avoid a landlord making a rash investment decision that they end up living to regret.


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