One Bedroomed Flat or Studio Flat?

by Readers Question

8:59 AM, 26th August 2014
About 4 years ago

One Bedroomed Flat or Studio Flat?

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One Bedroomed Flat or Studio Flat?

This is my first post so please be gentle. I am looking to purchase another BTL property in the town where I live. I already have a one bedroomed flat which I purchased a few months ago and after a small refurbishment have let it out without any trouble what so ever. I carried out all the marketing, letting and management myself and must say the information I have gathered from this website has been most helpful indeed, without it I’m sure I would have missed much of the legal requirements imposed on Landlords. One Bedroomed Flat or Studio Flat

The town in which I live has a large University and Hospital, plus is only twenty five minutes from London. I have seen an opportunity to purchase a Studio flat in a very nice purpose built block close to the University and Hospital, it’s also just five minutes’ walk away from the mainline station into London.

My thoughts are to purchase the property with a 75% BTL mortgage, carry out a small refurbishment and to furnish it to a reasonably high standard with every space saving quality item I can find. Whilst I don’t really want to rent to a student I’m sure that most are very responsible and would not trash the place should I need to rent to one. My main target audience however is obviously young Doctors or Nurses at the large hospital close by or young professionals commuting into London.

I would be grateful for the thoughts of any much more experienced landlords than me as to whether or not this plan is workable or have I missed anything that could potentially come back and bite me.

Basically, are Studio flats a good investment or should I just wait until I find another one bedroomed flat?

Thanks

David



Comments

Mark Alexander

9:04 AM, 26th August 2014
About 4 years ago

Hi David

What are the numbers?

I suggest you have a play with our Landlords Calculator, that should help you to decide - see >>> http://www.property118.com/calculating-rental-yields-and-returns/

Another deciding factor could be the ability to finance the property as lenders often don't lend on smaller properties. Even if you don't need a mortgage you should bear this factor in mind because mortgage availability will affect your resale market when the time comes for you to sell.
.

Neil Patterson

13:54 PM, 26th August 2014
About 4 years ago

Mark is quite correct.

Lenders criteria will state whether they lend on studio flats or not and then the minimum floor area they will accept. This is typically a minimum of 25 or 30 square metres, but it can be a different figure.

David Wallington

8:15 AM, 27th August 2014
About 4 years ago

Thank you for letting me know your thoughts on this, i think by the sound of it I should walk away from the studio flat and look for a one bedroomed flat.

Mark Alexander

9:44 AM, 27th August 2014
About 4 years ago

Reply to the comment left by "David " at "27/08/2014 - 08:15":

Not necessarily, how did you arrive at that decision?
.

David Wallington

19:24 PM, 27th August 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "27/08/2014 - 09:44":

I think I should be able to get a mortgage on the property as I was looking at a studio flat before purchasing the one bedroomed flat and was told by my broker I should not have a problem with obtaining a mortgage but I would not want to purchase a property that may be difficult to sell on due to the fact that potential purchasers cannot get funding.

Mark Alexander

19:46 PM, 27th August 2014
About 4 years ago

Reply to the comment left by "David " at "27/08/2014 - 19:24":

Size of studio flat is a major factor for mortgage lenders so if its big enough there shouldn't be too much of a problem in that regard.

The important figure to consider is your return on cash invested and break even interest rate. Why not run a few different scenarios with the Landlords Calculator to see what works best for you?
.

Christopher Browne

1:56 AM, 31st August 2014
About 4 years ago

In my opinion, a studio flat is less likely to have a long term tenant than a one or two bedroom property. This is perhaps based on warped logic but I imagine studios have a high tenancy turnover. Therefore this may be a key consideration to think about especially if you are self-managing the property.

That being said, in my only studio flat, the tenant has been in the property for 18 months now and long may it continue!

I would also say the annual costs (service charge & ground rent) can be proportionally higher for small flats than larger flats in the same block of flats. Net yield is however usually higher for a studio flat compared to a one bed. Both of these judgements are based on my limited experience and I'm sure could be counter-argued.

Jireh Homes

21:08 PM, 2nd September 2014
About 4 years ago

We also have a studio flat in our small portfolio and had similar reservations as to the attractiveness for rental. The key is to ensure a decent size > 30 m2 (typical minimum for many mortgage loans), a good size lounge / bedroom and well fitted out. You can also fit out with some very attractive fold-up beds which is great for showing off the space on viewings. Rental income and yield not significanly different to one-bed flats and we had multiple offers within a few days of advertising.

David Wallington

21:55 PM, 2nd September 2014
About 4 years ago

Thanks Jireh, that's just along the lines that I was thinking, the studio flat I'm looking at on Sunday is within a very nice block, roughly 30 square metres and in a reasonable part of town. we were thinking of fitting it out with top of the range furniture and asking around the same price as a one bed flat. You've put my mind at ease knowing that the plan at least has a reasonable chance of working.

David Wallington

13:27 PM, 8th December 2014
About 4 years ago

Hi Jireh. Could you let me know where you purchased the drop down bed for your Studio flat as I will be needing to purchase one soon and can't find what I'm looking for at the moment.

Look forward to hearing from you.
Thanks

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