Blue chip off the old block
Right-to-buy has meant good returns for former council flat tenants but, as ever, location is vital, says Chris Partridge
Wednesday 21 April 2004
Stephen Maguire's family home is a former council flat in Wandsworth. It's not exactly a palace, but thanks to the right-to-buy, it is helping fund his move to the country. Along with many other former council tenants, Maguire has not sold the house his mother bought four years ago (at a £30,000 discount on the market price), but has done it up and is renting it out at £1,360 a month through Chesterton. This is helping him to buy a house near Harrogate, where he is being sent by his bathroom company. "It was our family home for 20 years. My mother bought it for £98,000 and when she moved to Ireland to be close to our relatives, I refurbished it throughout."
All the best advice on decorating a place for letting was followed. "I was aiming for a contemporary, minimalist look," he says. "It has white walls, laminated wood floors and high-spec kitchen and bathroom." The result is an investment yielding 16 per cent. Even if the Maguires had paid the full price for the flat, the return would have been a very acceptable 12 per cent. "It goes a long way to financing my house [in Harrogate]," he says.
For Anne Cain, her old council flat in Battersea is her pension fund, and as someone in the up-and-down business of selling dolls' houses by mail order and on the internet, she regards it as an essential part of saving for the future. Cain bought the one-bedroom flat from the original tenant for £57,000 in 1990, and lived in it with her husband Dan for the first eight years. Then their first baby arrived, and with it thoughts of country life. "We had to get a bigger place, but we kept the flat on to help pay for it," she explains. "We did the place up cosmetically to let it, and it has worked brilliantly. Tenants have stayed for years, and have left it tidier than we did when we moved out."
This is in large part because the Cains made the effort. "We have been good landlords. Whenever there was a problem we have tried to help as quickly as possible and we have never put up the rent as long as it covers the mortgage."
The capital appreciation means the flat is now worth a substantial sum, which she does not want to sell for fear it will leak away. "I see it as a nest egg," she says.
The good returns sometimes obtainable on former council properties were highlighted recently, when it was discovered that the value of flats in a dreary block in Edinburgh had soared by six or seven times in less than a year, because of the construction of the Scottish Parliament building nearby. One owner had bought their flat for £11,000 a few years back and was confidently expecting the value to reach £250,000 as speculators moved in.
Ian Dickson of Winkworth in Hammersmith says former local authority flats are often a better deal than new apartments. "Buying an ex-council flat as a buy-to-let investment could prove a financially sound decision because they can be significantly cheaper than other purpose-built or conversion flats."
As ever, location is paramount. "Properties that are situated in small blocks often have greater letting potential then those on the large council estates," he advises. "The target market for ex-council properties is among young professionals, so when purchasing a property you should look for a location that has good transport and leisure facilities nearby."
However, flats on large estates can also be a good buy if it is convenient for a large college. "As a basic guide the larger the block the younger the tenants, until the property shifts from attracting young professionals to students," Dickson says.
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