2nd BTL 2 bed Vs 3 bed?

by Readers Question

15:24 PM, 2nd July 2020
About a month ago

2nd BTL 2 bed Vs 3 bed?

Make Text Bigger
2nd BTL 2 bed Vs 3 bed?

Hi all! Just hoping for a little advice or even a ‘what you would do not his situation’ approach.

I’m a relatively new landlord and getting my second property, so I have zero experience with decisions like this. Property is in Leeds city centre.

Was about to jump in on a 2 bed (new build) for 220k. Before pulling the trigger though there is a 3 bed in the same complex built in an earlier phase, it’s a 3 bed duplex with an extra parking space. It’s 240k so 20k extra. The purchase price isn’t an issue. In terms of rent, I could rent the 2/3 bed for 100-200 more pcm.

I’m as concerned about capital growth as I am yield,

Targeted Tenant in Leeds would be young professionals from what I’ve researched and spoken to local agents about, but also a healthy variation to that.

So my question is which one would you go for? Which one would be more likely to bring better net income?, i.e. longer lasting Tenants, less void periods etc

Additional information. 2 bed flat is on a 6th floor with a lift. 3 bed duplex flat is on the 3rd floor but no lift. 3 bed has a better/bigger living room. 3 bed had a Tenant already, 2 bed is brand new.
In my head the 3 bed is better ‘value’, but given that a 3rd floor 3 bed doesn’t exactly suit a family, is that 3rd bedroom pointless and most Tenant’s would care/pay more for?

Any advice is appreciated just o help me make a choice… Thanks

R



Comments

Neil Patterson

15:33 PM, 2nd July 2020
About a month ago

£100 extra pcm would be well worth £20k at 6% yield and £200 pcm for £20K would be a massive return.

Plus an extra parking space will increase potential demand and hence Price. Young professionals are likely to want a car at some point even if they don't have one now. Also 3rd bed could be an office.

LordOf TheManor

0:14 AM, 3rd July 2020
About a month ago

I'm easily with Neil on this one!

We're in changing times and with home-working set to be one of the new norms, a third room whether bedroom or office has to be the new 'gold' in the rental market, particularly so with 'central' and 'parking' on the list of desirables.
The 2-double bed market has always enjoyed popularity in high demand areas as it meets the demands of both down and upsizers.

My view is that as a result of more home-working becoming part of the 'new norm', housing demand will shift, making 1930s properties more attractive than ever with their '2 doubles + box room' layout perfect for this new demand for homeworking space.

Same realism for '2 bed' flats that are 1 double, 1 single. The reality (I believe) is that these will soon be redefined/remarketed as one bed flats with separate study/office space and prices will reflect what is on offer for this new view of usable accommodation/much in demand if more home-working firmly becomes the new norm.

For the situation of the property, if I were you, I'd go for the 3-bed, no question about it. Buy it and target your rental market accordingly.

Lord

Tony Hodge

10:02 AM, 3rd July 2020
About a month ago

No brainer, go for the 3 bed as it will have a wider market appeal. Also the 'old' 3 bed is now 'second hand' and will have lost the sparkle of a brand new house, hence will have depreciated to account for this so you now get more for your money.
Tony

Ivan Ratnayake

10:53 AM, 3rd July 2020
About a month ago

I do hear of some people renting out a car parking space separately as well in city centres (but not sure if this against the terms of the least). Going for the extra bedroom though, a definite plus.
My only reservation about these types of properties however are the rather expensive service charges quarterly and the ground rent.
From my personal experience this is quite prohibitive e.g £200 - £300/quarter service charge and £200/year ground rent and on balance new build flats are not one I would touch with a bargepole myself, but thats just me.

Clint

11:55 AM, 3rd July 2020
About a month ago

Definitely the 3 bed. The two bed will probably in the short term be worth less the day you buy it just like a new car has lost hundreds of pounds the day you buy it and drive it........could be just a mile

Jim Fox

12:03 PM, 3rd July 2020
About a month ago

Something else to consider if you do go for the 3 bed, is if you rent to 3 professionals, you are likely to fall under the HMO licensing scheme, which can be a bit of a hassle!

Penny DJ

12:13 PM, 3rd July 2020
About a month ago

The service charge for the 2 bed will include a fee for the lift maintenance, which can considerably increase the cost going on.

Yasin Leysan

15:11 PM, 3rd July 2020
About a month ago

Hello there,

I have seen people losing money by buying a new built flat at high premium price. It might look good now but in few years the rental income might not cover the increasing service charges and mortgage payments.

The situation the economy is in everyone is looking cheap or free rent period.

Why not look freehold and why not buy old house in right location.

Cheers

Ivan Ratnayake

15:30 PM, 3rd July 2020
About a month ago

I would totally agree with Yasin: You can find better pickings elsewhere with a freehold property.

silversurfer2017

17:06 PM, 3rd July 2020
About a month ago

Reply to the comment left by Jim Fox at 03/07/2020 - 12:03
Two of them could be persuaded to be a couple and therefore related?

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

SAL dismayed by Nicola Sturgeons eviction ban announcement

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More