London Buy to Let still makes sense

by Mark Edwards

19:00 PM, 18th May 2014
About 5 years ago

London Buy to Let still makes sense

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London Buy to Let still makes sense

One of my clients, Philip an IT consultant, recently completed on a purchase of a three bedroom house in Edmonton North London. It was his first venture into property investment and so I was impressed at how wisely he had bought. Furthermore it’s encouraging to see that it is still possible to acquire property in areas of London that provide good prospects of capital growth yet offer sensible positive cash flow from day one. Mark Edwards - "London Buy to Let still makes sense"

Using an 85% buy to let mortgage, I was able to arrange funding for him as follows:-

Purchase price £240,000

Deposit £36,000

Mortgage £209,100 (includes lenders fee being added)

Interest Rate 4.89% (2 Year Discounted Variable rate)

Rent £1300 pcm

Gross Yield 6.5%

Monthly Interest £852.08

Gross monthly cash flow £447.92

Gross return on capital invested 14.93%

The 85% product has no early repayment charges at any time, so as the property increases in value he will be able to release equity or refinance to recover his initial investment.

He was also able to arrange a corporate let with a local agent who provided him with a guaranteed rental for the next two years. Although just below market rent this was offset by no management fees being charged.

Edmonton offers excellent transport links with the journey from Edmonton Green BR station to Liverpool St taking only 25 minutes. The Tottenham Hotspur FC £400m new stadium and regeneration project, which includes shops, parks, 1650 new homes and 5000 new jobs is only a mile away.

You can find similar properties for sale to this example in the N18 and N9 postcodes.

If you would like to learn more about this case study or require mortgage advice please contact me.

Contact Mark Edwards

 

 



Comments

Adam Alexander

19:15 PM, 18th May 2014
About 5 years ago

Hi Mark

We met very briefly at my brothers house in Winter Haven Florida about 7 years ago.

I run a UK Letting Agency now, we advertise properties on Rightmove for a fiver.

Please tell your clients, details via my Member Profile 🙂
.

Neil Patterson

11:38 AM, 19th May 2014
About 5 years ago

Hi Mark,

An excellent example of how to make a lender's money work for you.

This is the sort of concise easy to understand business presentation I learned from you when we first met many years ago. Yourself and Mark A were two of the key people who influenced my understanding of how property investment worked when I moved from the sheltered environment of Banking.

Mark Alexander

14:16 PM, 19th May 2014
About 5 years ago

I've just Tweeted the following, please RT if you agree 🙂

Steve Elliot

16:10 PM, 19th May 2014
About 5 years ago

Hello Mark,

We have beautiful two bedrooms in Beckenham, a prestigious area of beautiful Bromley, London. The average prices for these flats are £389,000. Would you be able to help out with good mortgages for these properties, like the one you did in Edmonton?

Also, how can we access the properties you said are available in the N18 and N9 postcodes? They will be excellent buys for some of our clients.

Waiting for your reply via e-mail. Thank you.

Mark Alexander

16:28 PM, 19th May 2014
About 5 years ago

Reply to the comment left by "Steve Elliot" at "19/05/2014 - 16:10":

Hi Steve

Did you complete the Contact Form above?

Mark Edwards

10:00 AM, 20th May 2014
About 5 years ago

Reply to the comment left by "Adam Alexander" at "18/05/2014 - 19:15":

Hi Adam, yes I remember our meeting. Hope things are going well, will have a look at your profile and let any interested clients know.

Mark Edwards

10:03 AM, 20th May 2014
About 5 years ago

Reply to the comment left by "Neil Patterson" at "19/05/2014 - 11:38":

Hi Neil, nice to hear from you again.

Mark Edwards

10:06 AM, 20th May 2014
About 5 years ago

Reply to the comment left by "Steve Elliot" at "19/05/2014 - 16:10":

Hi Steve

Let me have a contact number and I will be happy to discuss the possibilities for your properties. The Edmonton properties can be found in the usual way, Rightmove, Zoopla etc.

Londoner 43

20:56 PM, 24th May 2014
About 5 years ago

Mark,

How long ago was this house purchase made? Not very recently, I take! Currently Righmove has one 3-bedroom house in Edmonton for £250K, and nothing at all under that price. There are also 3 others that have been sold for £240K or under, but they don't state how long ago they were sold. I presume the corporate contract was with a housing association renting properties on behalf of the local council/councils nearby.

It is extremely difficult to find a 2-bedroom flat, let alone a 3-bedroom house, in London for £250K. Perhaps somewhere in outer London, in zone 6 in east London. Edmonton Green train station is in zone 4. Edmonton is less than 9 miles from central London (Charing Cross.) Some housing stock there is in quite poor condition, although Edmonton has improved a lot, as it is a regeneration area.

10:51 AM, 25th May 2014
About 5 years ago

It's good to see a "sensible" case study, although I too was surprised that you can get a 3 bed house in Edmonton for under £250K, so perhaps it is not a current study as suggested above? Checking Rightmove and Zoopla shows that there is only one property listed at £250K and that has been reduced from £285K.

Edmonton has good transport links but a high proportion of social housing in the area. This creates social problems and there is a big drugs issue in the area that landlords should be aware of. Some of the housing is also poor quality, as mentioned above.

I have a one bed flat in Edmonton in a lovely new development and was shocked to hear that there was a mattress down an alleyway where children as young as 12 were having sex and there were also needles littered about! The management company have worked hard to stop this kind of behaviour, which is very off-putting to residents.

Thankfully I have a private tenant who works in the city but many of the flats are occupied by people on LHA.

A few things to be aware of about the outskirts of London - all gleaned from my 10 years of experience of investing in North London.

First of all, as you move out from Zones 1 and 2, the quality of tenants starts to diminish and transitions from private to LHA. There are plenty of tenants, but fewer good quality ones as you move out and around Zone 5/6 there is a higher probability that they will be LHA.

Properties away from transport links with no parking are VERY likely to only appeal to LHA tenants and have limited appeal to owner occupiers should you wish to sell.

I also believe that there is a "two tier" property market - new build and existing (often Victorian) stock.

Older stock commands a price premium with owner occupiers as they like the period features and will pay signficantly more for them. There can often be £30K to £50K difference between a new build flat and an older style flat conversion.

No one is building "old" or "period" houses/flats, so with that scarcity comes value.

Be careful of buying new build flats at premium prices and do not use older stock as your comparables.

I have just written a very extensive guide of how to BTL in London and the pitfalls to watch out for which you can find here:

http://www.propertytribes.com/how-to-buy-to-let-btl-in-london-t-11293.html

It includes a list of the top 20 most affordable boroughs in London in terms of house prices.

There are deals to be had in London, but they require intense due diligence and an understanding at a "micro" level.

Overseas buyers with deep pockets are paying over the odds and pushing up prices. It will be easy to get stung in the coming year, so my advice is to be very careful and understand your potential investment from all angles and don't get caught up in any sort of "capital growth" frenzy.

Buy in areas with high tenant demand and excellent transport links. Add value if you can.

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