Michael McNish of St Albans writes:"For about a year I have been contemplating buy-to-let property as a long-term investment, which will supplement my pension. The legal and tax costs have put me off in the past, but the Government's decision to increase the lowest stamp duty threshold to £120,000 has given me the impetus to act now.
"I know that after several years of large price increases many of the best bargains have gone and that in some areas the buy-to-let market is saturated, but do you have any ideas of what I should buy and where?
"My motivation is purely financial. I do not need to live near the buy-to-let property (it is almost impossible to find a flat below £120,000 in my area, anyway) and although its rental income must cover the mortgage, my real aim is to enjoy the maximum capital uplift over the next 10 years or so.
"One more thing - I understand that lettings agents charge 10 to 20 per cent of the monthly rental income just for advertising the property and handling the payments each month. I aim to do this myself. Do you forsee any problems?"
Graham Norwood writes:"You are right to approach this as a hard-nosed financial proposition, but wrong to consider going without a lettings agent. The challenge for new landlords is tougher now because after 10 years of buy-to-let, the best properties have been snapped up. But you are shrewd to act on the stamp duty change - in Ireland, stamp duty threshold changes led directly to increased prices, so you may fare better than you expect if you buy very quickly.
"Do not fall for estate agents' hard-sell of brand new properties in major cities that have already seen substantial investment, such as Leeds and Manchester. These will have new-build premiums built into the price, will often be in large blocks with service charges and may be difficult to resell. There are pipelines of new flats still to be built, mostly two-bed/two-bathroom units, so there may be a lot of choice for buyers if you sell up in a few years.
"Instead, choose modest properties in areas that currently have prices below the national average, but which are undergoing long-term regeneration. Look for houses and flats that may appeal to people seconded to an area as companies expand, and try for ones with advantages such as close proximity to transport links, good roads or business parks. Secondary locations, rather than city centres, will be the most affordable and are tipped by many to increase more in the next few years.
"Properties that were built or refurbished recently but are not brand new generally require less upkeep than older properties. You can get a good idea about regeneration schemes by finding where the Government is targeting expansion for new homes and businesses ( www.odpm.gov.uk) and by discovering where house prices are low compared to nearby areas ( www.landreg.gov.uk).
"As a first-time landlord, your rental income over a year must be 130 per cent of mortgage interest to satisfy a lender you can service the debt. For long-term lettings, you do not need to furnish a property, and utility and council tax bills are paid for by your tenant. Most analysts predict only small price increases in the next two years, so regard your investment as being for five or 10 years. When you eventually come to sell, up to 40 per cent of the profit you make may be lost through capital gains tax.
"As to estate agency fees, a good agent will find a tenant, check references and financial bona fides, handle routine maintenance and collect the rent. This is why you pay up to 20 per cent of rental income.
"If you try to do without an agent you must manage all this yourself. If you buy a property below £120,000 with investment potential, you must be looking 100 miles or more from your own home. Do you really want a tenant ringing you up at 2am to complain and you having to travel that distance to address the problem?
"Going without a lettings agent is a false economy. In any case, the fees, as with other professional services such as an accountant, reasonable decorating and routine maintenance costs, are tax deductable."
Property one: Refurbished maisonette, five minutes from central Plymouth.
Agent's details: An immaculate property spread over the ground and first floors in a Victorian terrace close to the city centre. It has a reasonably sized living room, a recently fitted kitchen, two double bedrooms and a new bathroom. Other features include double glazing, gas central heating and there is a parking space at the back.
Agent: Fulfords, 01752 223355.
Property two: A modern, two-bedroom semi-detached house in Corby, Northants.
Agent's details: A two-bedroom end of terrace house with UPVC double glazed windows, gas central heating, a driveway leading to garage, plus front and rear gardens.
Agent: Yates Walker, 01536 261666.
Property three: A two-bedroom semi-detached house near Gateshead.
Agent's details: Corner-based, two bedroom property near newly restored Saltwell Park close to the town centre. Spacious rooms and gardens to the front, side and rear.
Agent: Sarah Mains, 0191 487 8855
Current regeneration locations that fit the bill include Plymouth, where a medical school and university are both expanding, and where the city council wants to expand the population from 245,000 to over 300,000 in the next 15 years.
In the east Midlands, Corby is part of an £8.3bn growth zone earmarked for development by the government. A regeneration body, Catalyst Corby, is trying to encourage businesses to relocate there and is lobbying for rail services to turn this into a commuter town for London.
Further north, in Gateshead, the new Sage music centre is creating 800 jobs, and regeneration schemes in other areas of the Quayside will have new hotels and upmarket houses.
If you would like House Hunter's help in finding a property in the UK or overseas, write to: The Independent, 191 Marsh Wall, London E14 9RS, 020-7005-2000 or e-mail: firstname.lastname@example.orgReuse content