Bargain properties high yield but do I take plunge in sub-prime area?

by Readers Question

10:47 AM, 19th October 2015
About 3 years ago

Bargain properties high yield but do I take plunge in sub-prime area?

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Bargain properties high yield but do I take plunge in sub-prime area?

I’m a bit of a novice but what are everyone’s thoughts on buying properties at 35k/40k with a rental value of 350-400pcm? You might be able to guess the area from the price tag but these are post-industrial, highish unemployment etc areas.post industrial

I’m going into this with open eyes – terrible tenants, damages, relatively high fixed costs on purchases, low rent vs repair bills. Even so the yield and potential to build a smallish portfolio looks good to me.

The alternative would be a single classic student property BTL. This is not looking very attractive to me because of the new tax rules and interest rates. Thoughts?!

Cheers,

Martin



Comments

Ian Ringrose

16:11 PM, 19th October 2015
About 3 years ago

Get the road wrong and you will only get bad tenants....

The cost of fixing the boiler is the same on a £40K property then a £100K property.

I can only think of 1 or 2 agents I would trust at that end of the market.

It is also very hard to get a mortgage on low value properties and also hard to sell them to anyone other then a landlord.

Jonathan Clarke

22:09 PM, 19th October 2015
About 3 years ago

The 10% + yield naturally attracts. That`s the yield I aimed for when building my portfolio and it worked for me .

The main variable then becomes the tenant. Tenant selection is very important. I have many who are in low quality low cost housing - LHA and professional.

Many think there is an automatic correlation between low cost sub prime areas meaning bad tenants. That is wrong in my view.

Tenant selection is a vital skill. Get that bit right and you are on a roll
.

ben whitley

23:31 PM, 19th October 2015
About 3 years ago

Not too many decent lenders willing to go under 50k and I'd imagine surveys could be a prob for 35 k usually damp and a bit of renovation needed. Also if its anything like my end unless you can pull off a good doer upper releasing any equity to move forward is virtually non existent. Do u have cash though.. ?

Kim Choudhary

8:34 AM, 20th October 2015
About 3 years ago

Hello Martin,
I would like to suggest, before buying you first check what prices are running in that specific area. Don't just remain on price tag, check it yourself or take someones help. Once I also was trapped in same situation but luckily I got a certified borker, he did all these works for me. I would like to share it with you, hope it helps you. http://www.kustnara.se/om-oss/

Ian Ringrose

11:29 AM, 20th October 2015
About 3 years ago

A low cost subprime area that is close to “middle class” areas, is VERY different from a very low cost subprime area (with little tenant demand) that is in the middle of other low cost subprime areas.

Milton Keynes clearly has the tenant demand in the low cost areas, unlike some of the North East.

AA Properties Wales

20:49 PM, 20th October 2015
About 3 years ago

If you once had a life, don't buy in bad areas with Lha low quality tenants, I don't mean Lha (local housing allowance) nice families that you can trust that must be backed up by a guarantor. At the lower end of the market it is much more work, more paperwork by the bucketloads from the councils that pay the rent, more problems if the tenant claims to be vulnerable. My suggestion is to do it safe, do it all legally with your tax and enjoy having professionals in that have gone thru a credit check, with guarantor.


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