Property Investment in Peterborough – Free ebook

Regarding HMO's Peterborough is becoming over supplied with rooms to let, so the promised 14% yields are becoming harder and harder to obtain. Beware you had been warned...

Peterborough is a good place to purchase standard buy to let housing if you are prepared to look at hundreds of houses before finding a good all round investment proposition but I would question the figures in this article. I suggest that they are somewhat optimistic unless you can either negotiate the purchase of entire developments off plan or specialise in very poor housing stock in the run down areas of Peterborough and are not including the refurbishment costs in the equation.

Of course if we could see some genuine examples to back up the maths in this report we may think otherwise. A more realistic pre-tax return in the Peterborough City area is 5 – 7% for quality properties purchased as individual acquisitions.

In some of the outlying towns and villages, where property prices are substantially lower than Peterborough City prices, rental prices are similar making returns proportionately higher but it would be misleading to suggest that the area will easily see your investments return the types of figures in this report.

In terms of high demand for properties, I am in the midst of re-advertising 5 of my Peterborough city properties (3 down 2 to go!), which have remained at very steady rental asking prices over the past 4 or 5 years, and they aren’t exactly flying out of the door as the market in Peterborough is flooded with new build houses and flats.

Pre-tax returns on capital employed is very different to yield which is what may be causing confusion here.

Pre-tax return on capital employed is the net annual cashflow from a property expressed as a percentage of cash which a landlord has of his own tied up in a property. therefore, with the benefit of let's say a 75% mortgage the cash invested would only be £50,000 on a £200,000 property. A 14% return on that basis would be £7,000 per annum which seems perfectly reasonable to me as a net profit on a £200,000 property. This is of course just an example. I will contact Terry from Belvoir Lettings in Peterborough and ask him to provide details of an actual deal which he currently has for sale.

My business manages over 1000 properties in Pboro and Cambs which gives me some degree of experience about the PRS market place.

There is an over supply of poorly presented and badly managed rooms with shared facilities in Peterborough and I expect the same applies in many other locations. Too many ‘investors’ have purchased properties for quick income multi letting in troubled unattractive areas without really understanding the market place. These attract the wrong type of tenancy and have dragged down the overall average rent. Renters are more demanding and they now have choice. Rooms with en-suite showers in well managed and well presented properties let easily.

The most recent purchase to complete for a client of our in Pboro is a 3 storey 4 bedroom house in Hampton Hargate. The buyer is considering applying for planning change of use to make into 7 en-suite bedrooms with a large kitchen common room. The purchase price was £161k. The estimate for all works including furniture as a 7 bed unit which requires an extension is circa £50k. If planning for change of use is declined the capital for all works and furniture to make 6 en-suite rooms (2 pre existing) will be circa £30k .

Based on a 7 bed BTL HMO 70% LTV interest only loan at 4.49% the return on capital will be 15% (estimated £15k annual taxable income)

Based on a 6 bed BTL HMO 70% LTV interest only loan at 4.49% the return on capital will be 14.5% (estimated £11.7k annual taxable income)

I would be pleased to look at individual potential investments, forecast income and yields with any serious investor who is planning to instruct us to market and manage.

Detail of a sale property later this evening.

Reply to the comment left by "Terry Lucking" at "24/07/2013 - 08:47":

Thanks Terry, I'm looking forward to reading that and working with you more closely on the project which is linked below 🙂
.

Reply to the comment left by "Mark Alexander" at "23/07/2013 - 21:45":

Yes you had me there, I misunderstood the wording as I’ve never noticed property returns expressed in this way but I now see what you mean! I always work out net returns on rental yields when considering purchases, hence the figures I gave.

In fact the figures given in the article now seem quite low.

I’ve done the sums again on my 3 most recent standard Peterborough property purchases and see that the figures range between 18.5% to 24.75%, all with 7.4% rental yield. Conversely, I’m currently purchasing another slightly bigger property just out of the city, which gives figures of 18.5% and 7.4%.

Reply to the comment left by "DC " at "24/07/2013 - 09:36":

Excellent - well done 🙂

I'd be interested to see how you arrived at those figures and what expenses were included.
.

Reply to the comment left by "Mark Alexander" at "24/07/2013 - 10:04":

Mark, I used exactly the same formula as you did in your example, which didn't take into account fees or other costs, but other than the purchase cost there is no other capital to take into account in my examples.

Reply to the comment left by "DC " at "24/07/2013 - 10:17":

I'm not sure I follow what you mean when you say "there is no other capital to take into account in my examples".

Just to make sure we are actually comparing like for like, I using the Landlords Calculator wizard here >>> http://www.property118.com/landlords-calculator-review/40091/

Do you run a sales/letting agency?
.

Reply to the comment left by "Mark Alexander" at "24/07/2013 - 10:21":

Sorry Mark, sometimes things take their time to sink into the grey matter and today hasn't been a good day! I have looked at your calculator and for the property example used I got figures of 13.59% and 7.43%, whereas the very reputable source I have used and adapted into an Excel spread sheet allows you to include future growth which I had done at 2% pa but I have only just noticed this and now see why the results were so far out.
Those calculations may contain slightly different formulas to yours as well but they gave figures of 19.53% and 7.43% so sorry for causing confusion and I have slapped myself!