Chasing (Falling down) Property Yields
We read this morning an article called Diamond Buy to Let in the NorthWest. The article spoke about double digit returns in areas such as Burnley, Blackpool and others. The article even went to the extreme….
It reports that, if investors identify the best deals in the best buy-to-let locations – rather than looking at the typical return for the whole area – they could secure net yields well in excess of 20%.
We can tell you first hand….it is very nice to try to achieve these yields but in practicality a management nightmare could be in store. One of our JV Partners own 50 Buy to Let including some in Burnley. Management is the key. Drama is part of the reality. Without taking management into account the story is alot different.
We are in the process of buying blocks of flats from landlords either out of the country or even in London who could not manage them. Our other JV partner bought a fabulous building in Doncaster for 700k that a London investor bought several years ago for 1 milllion. The reason of the sale, mismanagement by the estate agent. This is a typical story. We have been promised the world only to be disappointed.
When we are speaking to potential investors or even buyers we stress the point of management. We focus on properties that have built in contracts with no voids…no managment…no maintenance…..or we are dealing with the councils themselves. In order to succeed in these so called Diamond areas you need local knowledge….strong management….low LTV loans….and reserves for the eventual voids or maintenance if you do not have social contracts.
We have seen too many allured into buying into these diamond buy to let areas to run with their tails behind their legs.
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