BTL Oxford or further afield?

by Readers Question

10:58 AM, 7th February 2018
About 10 months ago

BTL Oxford or further afield?

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BTL Oxford or further afield?

I need some advice from experienced investors please. I live in Oxford and am looking to buy my first Buy to Let property.

I have a deposit of £120k and the normal 3 bed properties in Oxford are priced at around £380k to £425k. My mortgage advisor has advised that from financial point of view I will be able to buy a property at around £390k.

I am unsure if I should buy in Oxford or somewhere in North (Liverpool or Salford) as buying in Oxford will mean I will have high mortgage repayments. I am in full time employment and low rate tax payer.

Is buying far from ones residence has any negative points – I will be looking to employ a property manager.

I look forward to any comments and advice please.

Kamran



Comments

Neil Patterson

11:06 AM, 7th February 2018
About 10 months ago

Hi Karman,

One of the key financial indicators to consider is Yields available in Oxford as opposed to a lower property value arrea. Are you in it for income or capital gain?

Have you considered if Section 24 mortgage interest relief restriction will push you into high rate tax or are you purchasing in the name of a limited company. Please see our Landlords Taxc Planning Page >> https://www.property118.com/tax/

Area should not be an issue for management of the property although convenience is a factor. Please see Letttingsupermarket >> https://www.property118.com/letting-supermarket-full-management/68829/

Ian Dimarian

12:31 PM, 7th February 2018
About 10 months ago

Reply to the comment left by Neil Patterson at 07/02/2018 - 11:06
Hi Neil
I would not advise putting all your investment into one property. In Burnley for example, you could spread your risk of your sole property in Oxford becoming empty, resulting in no income until relet, by purchasing around four refurbished & already let BTL properties. If one subsequently becomes empty you still have the income from three others to more than fund your mortgage repayments. Rental income is usually a minimum of 10% & any indexation gained is a bonus.
Also purchase via a Limited Company to ensure you receive mortgage interest tax relief.
Ian Ratcliffe

David Rundle

13:43 PM, 7th February 2018
About 10 months ago

Hi Kamran

If you buy in Oxford- former council homes are good investment.
I know a landlord who has used the Councils rent guarantee service - 3 bed is £1100 pcm three months in advance including any voids and you choose the tenant
see video
http://www.youtube.com/watch?v=lagnfbnL9WU

Ian Dimarian

14:30 PM, 7th February 2018
About 10 months ago

Reply to the comment left by David Rundle at 07/02/2018 - 13:43Hi
We need more detail to check out the best returns for each area, in this scenario, Oxford v Burnley.
In addition to spreading your investment over more properties in the Northwest you also need to consider the cost for any remedial works in future.
In the Burnley area labour costs, the availability of building trades & maybe material costs are generally cheaper, than in say Oxford, which is an important factor when considering maximising your net profits.
Also it depends on the type of tenant you wish to attract & rely on for your long term income & would your prospective tenants prefer to live on a former Council Estate or in a area which has more privately owned & individual properties.
As a rule, the south with tend to benefit from greater indexation & valuation over time, but which could all be taxable gains to be taken account of in future.
The Burnley properties & their like, tend to benefit more from the 10%+ rental income they generate, which can be more consistent as the same investment is spread over more properties, as it’s unlikely all would become vacant at the same time.
Some of your annual expenditure in repairs & maintenance could also be taxed at different rates.
It can be a long term win, win senarior for property investors in Burnley for example, particularly if you don’t wish to flip your portfolio for a one off, quick gain.
Dimarian.

Mark W

14:57 PM, 7th February 2018
About 10 months ago

As an BTL owner in Oxford (4 flats) I suggest a flat not a house. Oxford has a transient population and they usually cannot be bothered with a garden. Occupancy is usually good, keep in mind the movement occurs in June/July. City Centre is very is very pricey (1 bed = 400k) unless you bought years ago, returns are poor.
Stay inside the ring road and look for places with good bus links. House price inflation is crazy, even in 2008 prices just flatened and hardly dipped.
Good luck, Mark

Mark Walker

15:42 PM, 7th February 2018
About 10 months ago

Hi Kamran,

Have you considered using some creative property strategies to secure properties in the area?

This could increase your initial thoughts of 'buying' just one property to 'controlling' 4 or 5??

Cashflow and equity growth are still major elements of 'creative' deals.

Regards,
Mark Walker

Jonathan Clarke

2:48 AM, 10th February 2018
About 10 months ago

I was born in Oxford . Lived there 23 years. Still go there once a month to see family
If I lived there and had 120K I would invest there without hesitation. Its such a good solid area which yes is expensive but will always thrive and survive
I now live 35 miles up the road and 45 mins away in Milton Keynes and built my portfolio there without hesitation as its my doorstep and I know it well and its a growing dynamic location and I can control outcomes.
.
Liverpool is 3hrs and 175 miles away for you . Its a big unknown and you lose control as you have to put your trust in someone to look after your 120K in an area you are not familiar with. It has many unseen pitfalls that you cannot control . If it goes wrong you are out on a limb
There would have to be a massive massive pull for me to reach out so far away when you have beautiful Oxford on your doorstep
Invest locally is my advice

Mark W

10:38 AM, 10th February 2018
About 10 months ago

Agree. Nothing beats eye-balling a problem. Also Agents cost 10% and rarey use good value contractors.
MarkW (lived in Oxford for past 20 y).

matchmade

15:32 PM, 13th February 2018
About 10 months ago

I live near Oxford and have rented out an HMO there. I agree with MarkW and Jonathan Clarke: for your first property, *always* buy near where you live! You will have a head-start on understanding the sale and rental markets, you can develop a network of trusted tradespeople who are likely to be fair to you as you live nearby, you can learn to fix all sorts of little problems yourself and thereby save money, and if the worst comes to the worst, in a financially sticky period you could even live in it (with your mortgage provider's permission) and have lodgers instead of tenants.

Oxford is very expensive - more expensive relative to incomes than much of London - and there are reports of over-supply with HMOs aimed at students, now that the universities are building more halls of residence. Long-term though it's a pretty reliable investment: the jobs market is very healthy and there simply isn't enough space for more housing in Oxford. Yields are low, so you need to hold for long-term capital gains.

A cheaper alternative would be to look at some of the surrounding towns, where many perfectly well-paid workers are forced to live due to the lack and price of housing in Oxford (hence Oxford's traffic problems). Keeping in mind the need for easy access for yourself, have you thought of Abingdon or Thame? Witney and Bicester are other possibilities, but you would need to research local supply and demand and what sort of housing is needed: for example, houseshares/HMOs work well in Oxford for young professionals, who like the city's studenty vibe and don't mind sharing provided they get a more affordable rent, but HMOs are much less common in the surrounding towns and tend to attract less affluent tenants that may give you problems.

Ian Dimarian

18:30 PM, 13th February 2018
About 10 months ago

Reply to the comment left by Tony Atkins at 13/02/2018 - 15:32
Hi
Clearly Oxford & the surrounding area is a beautiful place to live but for a New Landlord, wishing to maximise returns & spread any of the perceived risks for a new property rental business it’s worth noting the following.
What’s been repeatedly highlighted here from experienced Landlords who know the Oxford area that :-
. Houses are clearly more expensive in Oxford so the option on this specific budget could only purchase one property initially, with the inherent risk of receiving no income when the property is empty.?
. Corresponding yields are likely to only be halve what they are in the North eg. Burnley v Oxford.
. Remedial works by local contractors could be more costly compared to prices in the North West.
. There maybe an opportunity in Oxford to achieve greater increases in future valuations but this is not guaranteed & there are legal & or revaluation costs at least to consider or having to possibly sell your investment to obtain the gain, but you then inturn loose your rental income.
. A good indicator of rental demand for any area is also when your advertising costs are minimum & rely mainly on a 2Let board placed in the window of your property to attract your next tenant, thereby possibly saving you on letting fees etc.
. As a business model for a new entrant wishing to become a Landlord & trying to limit where possible, these future risks & maximise rental returns, it’s hard not to favour certain parts of say, the North West initially & rely on regular rental income over a larger portfolio of properties for the same budget, as the main objective for the business, even when additional management costs may have to be considered.
However, the alternative to some of these management costs, is to consider taking calls from tenants direct & establish a good relationship with a local handyman for repair jobs/ painting, also for some viewings & utilise other qualified trades to undertake any remedial work,including annual safety checks etc. This may involve you in follow up calls to tenants to check work has been completed to their satisfaction, receiving photographs as well invoices, from contractors confirming the work done & a monthly or otherwise, trip to the area from Oxford to check on things yourself however, this does also afford you the opportunity to get your hands on a proper beer, allegedly!
Dimarian.


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